How to Pay Yourself from a Corporation in Canada? Salary vs Dividend Calculator (Pt 2 of 2)

This video is a walkthrough of a Salary vs Dividend calculator to determine how much salary, dividend, or both to to pay yourself from your Canadian Controlled Private Corporation (CCPC). The calculator was developed by Dr. Mark Soth (The Loonie Doctor Blog). Access and follow along here: www.looniedoctor.ca/ccpc-inco...
𝗧𝗼𝗽𝗶𝗰𝘀 𝗖𝗼𝘃𝗲𝗿𝗲𝗱:
0:00 - Intro
3:23 - Spending Plan calculation
4:21 - Income Smoothing to Plan for Large Purchases
6:16 - Income Split vs Cost Split with Spouse
7:25 - TFSA, RESP, RRSP contribution strategy
12:49 - Corporate Cashflow & Tax Planning
15:42 - Corporate Passive Income
19:15 - Corporate Notional Accounts
21:15 - Capital Dividend Account (CDA)
22:03 - General Rate Income Pool (GRIP)
23:01 - Eligible Refundable Dividend Tax On Hand (ERDTOH)
23:38 - Non-eligible Refundable Dividend Tax On Hand (NERDTOH)
27:46 - Personal Income Sources other than Corporation
28:35 - How much Salary/Dividend to Pay
33:06 - Total Taxes & Excess Personal Cashflow
34:47 - Income Split with Spouse
This presentation was created by Dr. Mark Soth from The Loonie Doctor Blog. Dr. Soth and Dr. Stephanie Zhou are co-lecturers in the Financial Literacy and Practice Management curriculum for residents and early-career doctors in Ontario.
𝗢𝘁𝗵𝗲𝗿 𝗥𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀:
1) Salary vs Dividends Pros/Cons: • SALARY vs DIVIDENDS: H...
2) Should I Incorporate? Incorporation Explained: • Student FAQs #5: Shoul...
3) Efficient Investing in a Corp / RDTOH: • Efficient Investing in...
4) Asset Allocation ETFs: • What is the BEST Asset...
5) White Paper: Optimal Compensation, Saving and Consumption for Owners of Canadian Controlled Private Corporations (Braden Warwick & Ben Felix) www.pwlcapital.com/resources/...
𝗗𝗶𝘀𝗰𝗹𝗮𝗶𝗺𝗲𝗿𝘀:
This content is for education and entertainment purposes only. Any information, views, and opinions expressed are solely those of the presenter and are not a substitute for financial advice specific to your personal situation. Dr. Stephanie Zhou has no personal conflicts of interest to disclose and was not paid by any parties to conduct this interview of Dr. Mark Soth. Her channel (Breaking Bad Debt) is monetized and may feature ads due to a change in TH-cam policy to include ads regardless of whether monetization is turned on or not.
Dr. Mark Soth's blog (looniedoctor.ca) receives a small commission from Qtrade Direct Investing from accounts opened using the affiliate link on the site. The commission goes towards offsetting the costs of running his blog.
#incorporation #smallbusinessowner #smallbusiness

[@BreakingBadDebt]

𝗧𝗼𝗽𝗶𝗰𝘀 𝗖𝗼𝘃𝗲𝗿𝗲𝗱:
0:00 - Intro
3:23 - Spending Plan calculation
4:21 - Income Smoothing to Plan for Large Purchases
6:16 - Income Split vs Cost Split with Spouse
7:25 - TFSA, RESP, RRSP contribution strategy
12:49 - Corporate Cashflow & Tax Planning
15:42 - Corporate Passive Income
19:15 - Corporate Notional Accounts
21:15 - Capital Dividend Account (CDA)
22:03 - General Rate Income Pool (GRIP)
23:01 - Eligible Refundable Dividend Tax On Hand (ERDTOH)
23:38 - Non-eligible Refundable Dividend Tax On Hand (NERDTOH)
27:46 - Personal Income Sources other than Corporation
28:35 - How much Salary/Dividend to Pay
33:06 - Total Taxes & Excess Personal Cashflow
34:47 - Income Split with Spouse
𝗢𝘁𝗵𝗲𝗿 𝗥𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀:
1) Salary vs Dividends Pros/Cons: th-cam.com/video/pX0ooVYaAmI/w-d-xo.html
2) Should I Incorporate? Incorporation Explained: th-cam.com/video/lwgSrrp4_2Q/w-d-xo.html
3) Efficient Investing in a Corp / RDTOH: th-cam.com/video/7a_R3CkufBU/w-d-xo.html
4) Asset Allocation ETFs: th-cam.com/video/fbffqs6sH1k/w-d-xo.html
5) White Paper: Optimal Compensation, Saving and Consumption for Owners of Canadian Controlled Private Corporations (Braden Warwick & Ben Felix) www.pwlcapital.com/resources/optimal-compensation-saving-and-consumption-for-owners-of-canadian-controlled-private-corporations/

[@trixbunnyman]

Awesome video. Thorough and clear. I would like to see this redone as if a spouse is involved in the scenario please.

[@1xymex1]

Thank you! Very very helpful!

[@MrHardikdpatel]

great content. very informative and thorough.

[@BreakingBadDebt]

Thanks! Appreciate the feedback!

[@MarkandElly_eats]

Awesome video! A quick question: how did you end up with $170,639 (net corp retained earnings to invest) when corp tax was $23,349? From $400k, you deduct salary ($209,451) so you are left with $186,794. So shouldn't you deduct $23,349 from it and have $163,445 as retained earnings to invest? Did passive income & tax section (still trying to understand dividends, CDA, RDTOH stuff) somehow cancelled out and give the corp more money in the end? Btw, thank you so much for these videos! They clarify a lot of things for me🙏

[@BreakingBadDebt]

Hi Mark and Elly, so what you're currently looking at is only active income ($186,794) but the corporation also makes income passively that year as well to an amount of $43,500 that comes from capital gains, ineligible, and eligible dividends. Now this is taxed at the highest personal tax rate depending on the province you're in (usually around 50%) but the reason why the Net Corp Tax on Passive income is only $7800 is because of eRDTOH and nRDTOH which refunds a portion of the tax.
- In the case of Eligible dividends, the refund is 38.33% (hence the $1150)
- In the case of non-eligible Dividends, the refund is only 30.57% (hence the $12,268)
- You only get the RDTOH when you pay out dividends to owner.
So when you take into account both the active and passive income together, this is why you have higher than just $163,445.

[@SLi-ry4dp]

Can this be made available as a podcast?

[@BreakingBadDebt]

Although I don't have a podcast, some of my career planning videos can be listened to on TH-cam Music like a podcast - this is the one I did with Mark: music.th-cam.com/video/xq2qFkqayvg/w-d-xo.html&si=_aC7CJTwp5KQa_4G

[@David.Bergeron]

So technically if I pay myself more in dividend then my investment in the corps makes I don’t have to bother about CDC? is that right?

[@BreakingBadDebt]

Do you mean CDA capital dividend account?

[@David.Bergeron]

@@BreakingBadDebt yes