Passive Investment Income Grind

The chart below shows the reduction of the small business limit at selected passive income levels.

Passive investment income grind. Work 60 hours week so you can work 0 hours week when you re 55 and you can live off of everything that you have earned. Under this formula the sbd will be eliminated when investment income reaches 150 000 in a given taxation year. What you need to know from the 2019 tax year onward certain canadian controlled private corporations ccpcs will have their small business limit reduced by 5 00 for every 1 00 of passive investment income that exceeds 50 000. This is a tried and true passive income investment strategy.

In addition a small canadian controlled private corporation ccpc. Passive income investment no. Since this is investment u we re going to focus on the more practical investment side of things. And one of the most profitable investments out there is staking a claim in dividend aristocrats.

Passive investment income and the small business deduction grind. The proposed measure would reduce the business limit by 5 for every 1 of passive investment income above the 50 000 threshold. You have to put in that hard work right now in anything that you do and you have to grind. Under the proposals the small business limit will be reduced by 5 for every 1 of investment income above a 50 000 threshold.

It can grow an individual s wealth in more ways than one. Abc company s passive income business limit reduction for its 2020 taxation year is determined as follows. This proposed reduction to the. Abc company is a ccpc having a december 31 2020 taxation year end and is not associated with any other corporations in the year.

The business limit would be eliminated if a ccpc and its associated corporations earn at least 150 000 of passive investment income in a year. I love active income because it s super motivating but passive income is the best because it means that you ve made it. Passive investment income budget 2018 active business income earned by private corporations is taxed at corporate income tax rates that are generally lower than personal income tax rates giving these corporations more money to invest in order to grow their business. Abc company s adjusted aggregate investment income for its december 31 2019 taxation year was 75 000.

The federal government put forward a consultation paper in july 2017 that it was looking to prevent companies deferring excess income in the corporation to use it to earn passive investment income after paying small business tax rates. How does passive investment income in your company grind the small business limit.