Have you heard about the Ultimate Tax Shelter?

It is Owning your own Business!

The No. 1 way to reduce your taxes with a smile is to convert your personal expenditures into allowable deductions. Turn even a hobby into a business and you’ll cut your tax bill.  It sounds tricky, but it may not be as difficult as you think.

Here’s how you do it: Turn yourself into a business owner. This is not complicated, expensive or difficult to do, and incorporation is not necessary. To be in business, you merely declare it. And by doing so, you can magically turn personal expenses into tax deductions. Here’s the best part: Your business doesn’t have to make a profit for your expenses to be deductible.  All you have to do is establish a “profit motive.”

From CRA’s Website, the definition of a business is an activity that you intend to carry on for profit and there is evidence to support that intention. A business includes:

A profession, a calling, a trade, a manufacture, an undertaking of any kind, an adventure or concern in the nature of trade.

Business income includes income from any activity you do for profit. For example, income from a service business is business income. However, you do not include employment income as business income. You need to know if you are an Employee or Self-Employed.

The date when the business can be said to have commenced must be known. Generally, we consider that a business starts whenever you start some significant activity that is a regular part of the business or that is necessary to get the business going. We look at each case on its own merits.

For example, suppose you decide to start a merchandising business and you buy enough goods for resale to start the business. At this point, we would consider that the business has started. You can usually deduct expenses you have incurred from that date to earn the business income. You could still deduct the expenses even if, despite all your efforts, the business ended.

It really is very simple, to be in business, you merely declare it. And by doing so, you can magically turn personal expenses into tax deductions.  Remember you don’t ever have to show a profit — just a “profit motive.” In one case, despite 20 years of losses, the court found a profit objective and allowed the deduction of business losses in full for one company. The case was not unusual.

8 Small Business Tax Strategies to Reduce Income Tax

Does the amount of income tax you paid last year make you shudder? You can’t avoid income tax, but there are tax strategies that you may be able to use to reduce the amount of income tax you pay if you operate a small business in Canada.

Read through this list of small business tax strategies and see how many you’re currently applying to reduce your income tax bill – and which ones you can start applying right now to reduce the amount of income tax you’re going to owe this year. (Note that some of these small business tax strategies only apply to people who are running sole proprietorships or partnerships, who file their income tax using a T1 form.)

1) Always collect receipts for business-related activities.

I’m amazed by how some business people don’t bother to get or keep receipts for “little” things. The parking fee on the way to meet a client, the “few” letters you mailed, the bag of coffee you picked up for the office – all these little things can really add up over the course of a year.

Maximize your income tax deductions by collecting the receipts for all your purchases that are or may be business-related, and recording and filing them appropriately.

2) Manage your RRSP contribution.

Managing your RRSP contribution is a much better small business tax strategy.

Your allowable RRSP contribution will carry forward if you don’t use all of it in a particular year, so estimate what your total income for the year will be and then decide how much of an RRSP contribution you should make that particular tax year, if any, to maximize your RRSP’s tax bang for the buck. It doesn’t make tax sense for you to make a large RRSP contribution in a low income year.

3) Maximize your non-capital losses.

Similarly, if your business has a non-capital loss (defined as when your expenses exceed your income for the business) in any year, consider when you can best use this loss to decrease your income tax bill before you use it. Non-capital losses can be used to offset other personal income in any given tax year, can be carried back three years, or carried forward for up to seven years. It may make more sense for you to carry your non-capital loss back to recover income tax you’ve already paid, or to carry it forward to offset a larger tax bill in the future than it does to use it in the tax year the capital loss occurred.

4) Maximize your charitable income tax credits.

Charitable donations to registered Canadian charities or other qualified donees earn you tax credits. But are you aware that charitable donations that total over $200 provide you with more of a tax credit because they’re assessed at a higher rate? To maximize your charitable income tax credits, consider giving more to the registered charities of your choice this year. If you make $30,000 in income and decided to give only 5% of your income, the fortunate charities would get $1500. (Be aware that non-registered Canadian charities, American charities, and political parties don’t count.)

5) Maximize your Capital Cost Allowance (CCA) income tax claim.

Most Canadian small business owners know that instead of just deducting the cost of whatever depreciable property they’ve acquired to use in their business in a particular year, they need to deduct the cost of the depreciable property over a period of years, through a Capital Cost Allowance claim.

But many small business owners are not aware that they don’t have to claim Capital Cost Allowance in the year that it occurs – a tax strategy that you can use to reduce your income tax. The CCA is not a mandatory tax deduction so you can use as much or as little of your CCA claim in a particular tax year as you wish; you can carry any unused portion forward to help offset a larger income tax bill in the future. It doesn’t make sense for you to take your full Capital Cost Allowance claim deduction in a year that you have little or no taxable income.

Another aspect of maximizing your Capital Cost Allowance claim is to buy (and sell) your assets at the right time. You want to buy new assets before the end of your fiscal year and sell old assets after the current fiscal year.

Be aware, too, of the 50% rule; in the year that you acquire an asset, you usually can only claim 50% of the Capital Cost Allowance that you would normally be able to claim (and in some cases, the “available for use” rule means that you can’t claim Capital Cost Allowance until the second tax year after you acquired an asset).

6) Split your income.

The income splitting tax strategy lets you take full advantage of the marginal tax rate disparities. The higher your income, the higher your marginal tax rate. By transferring a portion of your income to a spouse or child, a person with a lower income, you can reduce the marginal tax rate on your income.

This is an especially powerful tax strategy for small business owners with children of post-secondary school age. Suppose that you employed your 19-year-old daughter in your business, paying her a salary totaling $10,000. Because of the basic personal income tax exemption, she would pay very little income tax, and would have a nice nest-egg to help pay for her education. (If you paid her an income equaling the personal income tax exemption, she would pay no tax at all!) And meanwhile, you’ve “lopped” $10,000 off your income for the year, decreasing the amount of income tax you personally owe.

7) Take full advantage of the income tax deductions available to home-based businesses.

Do you operate your business out of your home? If not, what’s stopping you? While not every business is suitable for a home-based business, home-based businesses do have advantages when it comes to income tax. Besides the Business Use-Of-Home Deductions, home-based business owners can deduct a portion of many home-related expenses, such as heat, electricity, home maintenance, cleaning materials and home insurance. If you own your home, you can also deduct portions of your property tax and mortgage interest. See attached list of potential business.

8.) Incorporate your business?

One reason many sole proprietors and partners incorporate their businesses is because of the tax advantages of incorporation. The best known of these tax advantages is the Small Business Tax Deduction, whereby the income of qualifying Canadian-held corporations is taxed at a special “reduced” rate. For Canadian-controlled private corporations claiming the the small business deduction, the corporate net tax rate is 11% as of January 1, 2008. For other types of corporations, the corporate net tax rate is 19.5% as of January 1, 2008.

However, incorporating your business as a tax strategy will only be effective if your business has grown enough for incorporation to be worthwhile. You not only have to have a significant income already to offset the costs of incorporation, but need to be prepared to leave enough of your business earnings in the corporation to benefit from corporate tax deferral.

For instance, if you operate an incorporated business and the corporation’s profits in a given year are $60,000, but you take $60,000 from the corporation in salary, your $60,000 is then taxed just as your personal (T1) income would be now, making incorporation for this reason pointless.

Start Reducing Your Income Tax Today

While not all of these tax strategies will work for every small business, hopefully this list has gotten you thinking about tax planning. The amount of income tax you pay is not an absolute written in stone. There are legal, sometimes simple things you can do to decrease your income tax bill – small business tax strategies that you can start applying today.

Example of a small business;

MLM business cost:                                      $ 250.-

Home office:  $500 P/M X 12                    $6000.-

Gas and Food and Misc.                              $3000.-

Total expenses                                               $9250.-

Profit                                                        -       $  500.-

Total Losses                                                    $8750.-

Taxes saved at MR  of 30%    approx.      $2625

Please contact Golden Goose for small business opportunities that will help you save taxes!  We can offer you some great suggestions!

With all the global uncertainty in the world, the average investor has lost confidence.  The Market is up and down like a yoyo, and these are turbulent times.  The world markets are changing like we have never seen before.  Entire countries are failing and reaching points of no return.  It seems like the monetary system as a whole has a heap of problems beyond the comprehension of the normal folk.

I read an interesting article.  I am including part of it in my post today.  It really got my attention.  Here is the link to the full article:  here )  I bolded some important information…

White paper authors Lisa Shalett, chief investment officer and head of Investment Management and Guidance for Merrill Lynch Wealth Management, and Ian Bremmer, president of Eurasia Group, address worldwide investor concerns and identify opportunities presented by the seismic changes in the balance of power driving today’s markets.

The webcast features Shalett and Bremmer and is moderated by Ron Insana, senior analyst and commentator for CNBC.

“The Great Global Shift: New World, New Rules” explores new investment approaches in light of the changing global economy. Signaling instability, developed countries are turning inward to fix infrastructure and financial problems; at the same time, emerging-market nations are showing promise for continued growth, but many are not yet offering solutions for global economic issues.

As a result, “The Great Global Shift: New World, New Rules” advocates that investors give at least as much thought to risk management as efforts to maximize returns. Managing risk in this environment requires investors to be flexible, dynamic, and global-minded and adapt portfolios to meet emerging challenges and opportunities. To keep up with this profoundly changed world and realize personal financial goals, investors need to consider looking outward and diversify not just through traditional domestic stocks, but through geographies and asset classes.

“People have to face the market head on and understand how to seize opportunity in this new world as it evolves,” said Shalett. “That means considering the economic, social, and political dynamics in play. The greatest risk to failing to meet financial goals stems from investors using a ’stay the course’ approach to their portfolios.”

In August, 54 percent of Americans rated current economic conditions as poor, up from 42 percent in July, according to Gallup’s Economic Confidence Index. The decline in confidence due to the current volatility in the markets and the growing global financial crisis has investors clinging to their familiar tactic: buying and then “holding on for dear life.”

“Eighty percent of Americans believe the economy is getting worse, which is understandable in this turbulent global environment,” said Bremmer. “But despite much of the geopolitical uncertainty and the economic rebalancing happening in Europe, the United States, China, and elsewhere, there are ways to find success and growth even as the unpredictable occurs.”

I felt this article was really powerful because so many people hand off their portfolio to someone else to manage.  They are not aware of what they even hold in them, and the portfolio manager is not personally paying attention to what they selected for investments at the time they invested.  Honestly, I don’t beleive that the average person even takes the time to open up and read their RRSP portfolio statements, and if they do, they probably have very little understanding of the information on it.  Most of their investments are stock market related and not personally managed.  What might have been good growth a few years ago is not doing so hot now…  The typical advisor will tell you to hold on for the long run, and clearly here in this article, this is obviously not the right move for most of us.

It might be time to start thinking outside of the box if you haven’t already.  Think about Private investments in companies not listed on the exchange that have a strong asset base and an established business plan.  Consider private equities as part of your portfolio and start to take back control of your money!

Take the time to familiarize yourself with White Capital Corp and the product line up this Exempt Market dealer has to offer and contact someone in your area that is an authorized representative with them for some insight into diversifying your portfolio.  You will be glad you did!

The stock market is going crazy today and there are more huge losses.  I was chatting with my friend about a mutual friend’s promise to us.  His portfolio was doing so well and had more than tripled in the last 12 months.  He was going to take us all for dinner when it hit 31  (His exit number).  Hmmm things were going so well, that exit moved up and up.  We could have been sipping margaritas by now, but after today, I doubt it will be for awhile!    He got greedy, as most of us do, and we hold on for that little bit extra and the hope of making more.  When BANG, someone hits the wrong button on wall street or some new bill gets released, or some other unexpected event happens catapulting all we knew out the door and sending things into chaos!

All those dreams dash out the window and we hope that we have enough profit to ride it out, but where do we get off that crazy train?  It is great to manage your own stock portfolio but it is tricky to know when to get in and out of trades.  In doing some research, I was able to discover that less than 10 Mutual funds have successfully and consistently performed at 10% per year for 20 years straight.  That is staggering considering there are over 1500 mutual funds in Canada.   When you factor in the fees you pay to manage these funds as well, you don’t end up with much left over and if you don’t know when to get out of certain trades, it is ovbious by this discovery, that your broker doesn’t either!

I believe that people are becoming  more aware of the facts now a days.  NO ONE CARE AS MUCH ABOUT YOUR MONEY AS YOU!

You should not have all your eggs in one basket.  You might believe you are diversified but are all your investments in stocks such as mutual funds?    This is all in one place, the stock market.  The stock market no matter how you slice it or dice it, is volatile.  Capital preservation is important.  When you factor in the time value of money, and the rate of returns, it should make sense.  You can  not safely project those returns in your mutual fund portfolio and that is becoming more and more obvious.

Managing your own stock portfolio is not easy either.  Knowing when you should get out, and doing it is another thing.  Not letting greed get the better of you is not simple!   We are so attached emotionally to our money, it is hard to think straight when you are loosing it!  Some times it is easier to just find a great company, with a solid track record, fixed rates of returns, assets to back your capital and invest in something real like real estate, or private oil and gas companies, or a business that is run very efficiently.  I believe that  there are many more excellent Canadian companies that can prove a positive track record over the last 20 years of 10% per year or greater without the fees than you will ever find in Mutual funds!  I recommend two to look up if you are interested.  Jaymor and Foundation Capital!  See my Opportunity page as well for other amazing companies.  I know you won’t be disappointed.

Preserve your capital!  Manage your own money and take back your control of your financial future!

I just got back from Vegas!  It was Super Bowl Weekend in America, the second busiest time of the year.   (New Years Tops it!)  It sure wasn’t very evident that the US was in any kind of recession the way the casinos were packed!

Every fancy store you could think of is there!  It was fun to see what kind of things people spend their money on.  We saw a Cell phone that was $150,000.  Can you only imagine?  We stayed at the 5 star Wynn on the 58th floor looking over the strip!  It was really amazing!

As I watched the poker chips fall on the table and slot machine lights flashing, I could not help but notice how many men were gambling.  I suppose their wives were shopping, getting value for their money and having something other than a hangover to show for the next day! 

It made me think of how we look at investments and risk.  Do we chance it like a slot machine that requires no strategies, are we playing the odds at Black Jack, do we have a strategy like poker?  Maybe you leave it up to your partner and just go shopping and hope for the best?  Or are we conservative and hold onto our money and walk on by the casinos, taking in a show instead?

What it all boils down to, is not paying attention to your financial situation is really like gambling in the end.   Not having an active role in your investments is like giving it to the house, you might end up with a bit extra in your pocket at the end of the day, but most likely you won’t be a winner!

Here are 5 simple tips to make sure you don’t gamble away your money!

1.)  Begin to understand more about finance.  Being here is an excellent start!  Add to that by checking out the books we recommend and do a bit of reading too!

2.)  Start saving and become an investor if you haven’t already!  You absolutely need to think about your future, time flies and at some point you will be unwilling, or unable to continue to work.  If you haven’t got any plan, you will be dependant.  No one wants to be a burden so start small if you have to, but the main message is start, period!

3.)  Take an active role in your investments.  Don’t hand that job over to someone else to do it for you.  Be clear on what you are investing in, how long it is for, what  kind of projected returns they are offering, who the managment team of the organization is!  Do some due dilligence and take control of your money!

4.)  Diversify with more than one investment and more than one company!  NEVER put all your eggs into one basket.  Trust me!

5.)  Never invest more than you can afford to loose in any one investment, no matter what!  That is like going to a casino with no budget, and making one big bet with your credit card.  You don’t really ever know if you are going to win or not, and no matter what anyone says, there is RISK in everything!  Even T-bills and Savings accounts have risk attached to them.  Oh course there is managed risk, but it is still risk!   Don’t let this idea scare you and stop you from investing, but diversify and due diligence are your friends when it comes to risk management!

Take your time and you will be the winner not the house!

So many Questions… I am excited about starting this journey with you! Why isn’t there more education around finances. What does all the talk about the DOW and S&P 500 really mean… Where is your money invested and do you even care? Do you ever open the statements you get quarterly, or annually to see how you are doing? Has anyone ever showed you how to read one of those confusing statements? Or are your investments neatly tucked away in some investment your banker suggested during RRSP season and you are imagining that when you reach 55, or 65 that you will have a big nest egg?

Or maybe you aren’t a saver? Maybe you are a spender and you aren’t going to worry about tomorrow… Possibly you are really an avoider and just can’t deal with all this stuff right now?

Whatever you may be, I want to help you! I was like you once and I know you better than you think. I know what society has done to us, and the conditioning we are caught up in. I know that deep inside all of us we crave to be taken care of, nurtured and loved! We look for safety and trustworthy people to help us yet in this fragile element of our lives, as we have seen again and again in the media, money brings out corruption, dishonesty and greed in so many. Fear raises its ugly head and we become paralyzed in taking control of our hard earned money! We continue to feed the banks, or drive ourselves into debt, or just continue avoiding the whole matter and do nothing that will get us to our goals of a well deserved nest egg or better yet, give us that golden goose that lays wonderful golden eggs so we can finally enjoy having more all the while not having to work as hard as our money is working for us!

So you find yourself here, the first of many blogs on the Golden Goose Secret, where all will be reveled for you to discover the mysteries behind your money!

Welcome to The Golden Goose Secret!