Salary & Dividend Mix:
Following my previous blogs, the last option about how I should pay myself at the end of this year would be if the owners of corporation are using a mix of dividends and salary in order to minimize their taxes. They still have to pay some taxes and CPP however, you have already prepared yourself to pay some taxes and won’t be surprised towards the end of the year.
For instance, Mykel is an entrepreneur who owns ABC Co. He is living in North Vancouver, BC. He wants to pay himself a mix salary and dividend for 2014 tax season. He would like to keep his taxable income at a lower tax bracket and minimize his taxes as well as, he wants to increase his earned income in order to increase RSP room for the purpose of RRSP contribution.
After consulting with a tax specialist he decides to pay $35,551.00 dividend and $10,000.00 salary to himself at the end of 2014 . The total of his taxable income would be something around $55,000.oo after gross up his dividends. He can decrease his taxes by contributing to his RSP at the end of 2014 (during year) or for the 60 days in the following year in 2015.
He will still be in the second bracket of the Federal and Provincial taxes (29.70 % both taxes) which still is less than 3k taxes for 2015 tax return.
If Mykel contributes $5000.00 RSP (monthly/lump sum) to his RSP plan, then he can save in significant tax charges for 2015 tax return.