Tax Advantages for the Investor

It is extremely difficult for most individuals to accumulate any real savings from their work salary alone due to the progressive tax system in Canada. The more money you make, the more taxes you pay. People work very hard to save, and when they do save some monies, any interest earned will be taxed as ordinary income. Certain types of investments and investment techniques allow an investor to take advantage of opportunities to avoid undue taxes. The less tax you pay, the higher your return will be on any given investment. A real estate investor is able to take advantage of a number of tax planning techniques and strategies.

The Canada Revenue Agency termed R.E.I.T.’s “flow-through entities” (F.T.E.’s) for this particular reason: individual unit holders are permitted “flow-through” income remuneration and tax deductions that are usually only available to individuals who directly own the real estate asset. Real estate investments offer steady appreciation and deliver a strong, inflation-adjusted annual income. In addition, leverage and tax advantages are powerful investment tools.

S.T.A.R.T. provides a method of reducing taxable income. This results in a reduction of the payments made to tax collecting entities, including federal and provincial governments. Governments allow individuals to invest in their own pension in order to reduce the burden of the government funded pension system. S.T.A.R.T. provides tax savings that simply allow otherwise paid money for taxes to subsidize your retirement investment plan.

Effective Tax Planning

Tax evasion is an effort or practice to not pay taxes by illegal means. A few individuals may attempt to stretch the limits of legal interpretation of the Canadian Income Tax laws. Effective tax planning is certainly not illegal, and it is possible to reduce your tax liability within the framework of the Canadian tax laws.

Real estate makes good tax sense. S.T.A.R.T. makes even more sense. To begin with, your financial services are tax deductible. The cost of these financial services is included in the purchase price of units and is therefore treated as an expense for tax purposes. Also, interest paid on purchase loans is also deductible. Real estate continues to be one of the most effective tax planning vehicles available and proven long-term investments.