The great Canadian goal of financial independence usually begins with the statement “when I pay off my mortgage, then….”. To this end, reducing the income tax we pay (the 31, 43, 46% rate) *is our most important part of the financial independence equation.

If we can utilize legal structures that wipe out part or all of tax at those rates, this puts far more in our own pockets than our investment portfolios usually generate (see the below case study). Most solutions offer an effective return of 20-60+%.

Solutions for tax reduction that involve deductions from tax assisted investments can be bought with borrowed money. Borrowing for investment purposes allows borrowed funds to be tax deductible. By borrowing annually over a series of years, and using the full tax return to pay off an existing debt such as a first mortgage on a home, then carrying the loan for investment purposes (which is deductible), will “swap” the current non-deductible debt with the new tax deductible debt. See link “Tax deductible debt? In Canada!!!” for a graph and illustration.