# SM - Tax Implications



## lowent (Oct 1, 2009)

My wife and I (early 30s) dipped our toes into the SM waters for the first time in 2010. As a result, this tax season is our first time taking advantage of the interest expense deduction.

As I gleaned from other threads, in situations like this either my wife or I could claim the interest expense deduction (all of the relevant accounts and HELOC are registered jointly), but that once a choice has been made, best to stick with it indefinitely rather than pique the interest of the tax officials (assuming no major life changes). 

Considering that I am the bigger earner (135K vs 50K), presumably it makes for sense for me to take the deduction. Is this anything I am overlooking now on in the future that might affect this choice? Alternatively, would it be wiser to just split the deduction 50:50?

Thanks for your help.


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## Jungle (Feb 17, 2010)

Have you looked at your dividend tax rate? (assuming you received dividends)


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## lowent (Oct 1, 2009)

It appears my dividend tax rate at the highest bracket would be 16.49%; 9.76% for my wife.


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## Jungle (Feb 17, 2010)

Multiply your tax rate by your interest costs. 
Multiply your dividends by your divided tax rate. 
See how much you get back from interest, see how much you must pay in dividend tax. 

Then do the same for your wife; compare results, but think long term. 

Ed Rampel argues the best way is to use investments that pay little or no income. Then you can use your high tax rate to deduct interest costs and pay little or no dividend tax. 

In the long term, it looks like divided tax is going up in ON.


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