Do I Really Need to Declare $80,000+ this Year?

[Daniel Massicotte]

I have a scenario that is playing out. I want to get some outside perspective from other investors, lenders, etc.... ideally from people with experience in Canada, but of course, not mandatory.

Here is my Situation:

In 2012 I bought a $400k pre-construction condo in a prime location in Toronto. The deal is: 5% down at signing and no other payments until 2017 where 15% was due in the spring (last month) and another 5% will be due at closing (Fall 2017). I will be applying for a mortgage this fall based on my annual earned income of about $80,000 in 2016 and less than that it prior years. 

In January I quit the company I was working for, because I have a company of my own and it was supporting me financially - it was time to leave. The plan was to apply for a mortgage this fall at closing based on my 2016 and 2015 earned income of $80,000/year. However, closing has been delayed to Fall of 2018.

I could pay myself a salary of $80,000 in 2017 (through my company). But I don't NEED $80,000 of earned income; I need about $40,000 or less. If I pay myself $80,000 I'm incurring extra tax, EI premiums other expenses like Canada-Pension contributions, etc.

I have a credit score of 700+ and have 10+ year old bank accounts with the two largest banks in Canada

So here's what I'm wondering:

1. Do I really need $80,000 in earned income in 2017 to get a mortgage in 2018?
2. How little can I earn in 2017?

My thinking and ways of thinking has shifted a lot since reading the forums, podcasts, blogs and meeting/chatting with members. Looking forward to hearing from you guys.

[Allen Fletcher]

@Daniel Massicotte

In the US, where I live, there are ways that a business owner can take a reasonable income from his business (which is taxed as income) and have the business pay more to him as a dividend (which is taxed at a much lower rate). It takes some time with lawyers and accountants to set up your business in this way, but it may be worth it to you to see if this is possible in Canada.

Good luck,

Allen Fletcher