Best way to allocate investments/tax deductions for a self-employed salary of 140k?
I would like to ask for advice for a friend who
1. is self-employed
2. has a salary of more than 140k
3. wants to invest in stocks and mutual funds
Firstly, how would you allocate your investments?
I was thinking of firstly, maximizing RRSP contributions. In the RRSP, I would recomment holding mostly USD stocks and mutual funds. Secondly, max out TFSA, with mostly canadian dividend stocks and mutual funds. Thirdly, with the left over money, he can do some trading in a non-registered account?
Secondly, what are the tax deductions a self-employed contractor can deduct? He's in the medical field and doesn't really have much expenses. This is all I can think of for now:
1. car (ex: mileage, gas, maintenance, etc.)
4. salary for employees
5. conferences/continuing education
Is there anything else he can deduct? With a marginal tax rate as high as his, he'll deduct anything he legally can...
With a salary of 140k, would it be worth it to incorporate? He has met a few financial advisors who all recommended to incorporate, but he has grown weary of financial advisors and distrusts them.
Any help concerning these three issues would be greatly appreciated. (1. investment allocation, 2. tax deductions, 3. incorporation)
If he's self-employed, he doesn't have a salary - he just has self-employment earnings. Earnings of $140K per annum presumably gives him less after personal expenses are paid. Typically incorporation isn't recommended until the incorporated person can leave ("shelter") $100K per year or so in the corporation as the deductions that are already available (you've listed them) provide essentially equivalent benefit.
Variables will include: if he is married, there is the potential for income-splitting; if he is young, the time available to shelter income in a corporate structure is greater; and more. If he doesn't want to talk to a financial advisor, he should find a competent lawyer and/or accountant who can create some basic scenarios for him to evaluate.
Hi..I'm also self employed contractor...I also want to make such investments in near future..Your tips will help me very much. Thanks again.
It all depends on whether you want to spend $ 140 K per year and live the Highlife then no don't incoporate.
If you can live on 40-50k per year through dividends and let the remainder build in the corp as a self managed pension and do not want to contribute to CPP then look at incorporating. If you have around ten working years or better left.
There's lots of things the corp can pay for thats not taxable to you and an expense for the corp , mileage, medical benefits, professional fees.
Is it the right move. depends on lots, spouses income, financial position, long term goals. Go pay an expensive accountant for some advice.
I can't comment on the investments. I'll take the GIC at 2%
I would tell your friend to go consult an accountant and find out the rules and regulations that are applicable to his/her situation of self employment. Yes they should deduct anything they legally can.
Second, unless they are planning on indexing or are going to use efunds through TD, I would buy etf's rather than MF's.
Third, open a TFSA immediately, do not use it for savings. Invest.
Fourth, unless they were expecting growth in their earnings in the near future, I would not incorporate at this point.
Also, they may want to discuss with a fee based adviser regarding their investments. US investments should go in an RRSP.