Cash Damming vs. Smith Maneuver For Canadian Investors

Nov 13, 2024

Dive into the world of innovative debt strategies like cash damming and the Smith Maneuver. Learn how to convert your mortgage interest into tax-deductible debt and boost your financial health. Discover the key differences between these approaches and how they can benefit unincorporated business owners. Gain insights on managing debt strategically to enhance passive income and reduce tax liabilities. It's time to rethink the role of debt and turn it into an asset for wealth accumulation!

Ask episode

AI Snips

Chapters

Transcript

Episode notes

INSIGHT

Cash Damming Tax Strategy Explained

Cash damming is a tax strategy similar to the Smith Maneuver that converts personal mortgage interest into tax-deductible interest.
It helps business owners, especially unincorporated ones, reduce tax liability on business or rental expenses by leveraging debt strategically.

ADVICE

Use Cash Damming for Expenses

Instead of paying business or investment expenses directly, put that money on your mortgage first to reduce non-tax deductible debt.
Then borrow that amount back through a line of credit to pay those expenses and make the interest tax-deductible.

ADVICE

Check Interest Rates Before Cash Damming

Ensure your home equity line of credit interest rate minus the tax deduction is lower than your mortgage rate before using cash damming.
Otherwise, you may pay more in interest than you save in taxes, making the strategy ineffective financially.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

Are you missing out on tax savings and passive income by not taking advantage of smart debt strategies like cash damming?

Many Canadians are familiar with the Smith Maneuver for converting mortgage interest into tax-deductible debt, but few know about cash damming—another powerful tool that allows you to maximize tax savings and transform your business or rental property expenses into tax-advantaged opportunities.

Today, Kyle Pearce and Jon Orr dive into the mechanics of cash damming, explaining how it works, why it’s similar to the Smith Maneuver, and how business owners, especially unincorporated ones, can take advantage of it. If you’re aiming to minimize income tax and make your debt work for you, this episode will show you a practical pathway to improve your financial health by maximizing the tax efficiency of your expenses.

Discover how cash damming can convert personal mortgage interest into tax-deductible debt.
Learn why debt, when managed strategically, can be a powerful asset rather than a burden.
Explore how cash damming can reduce your tax liability and increase your passive income potential.

Listen now to find out how to turn your business or rental property expenses into a tax-saving advantage and build wealth with smart debt strategies!

Resources

Canadian Wealth Secrets Show Notes Page

Consider reaching out to Kyle if you’ve been…

…taking a salary with a goal of stuffing RRSPs;
…investing inside your corporation without a passive income tax minimization strategy;
…letting a large sum of liquid assets sit in low interest earning savings accounts;
…investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting corporate passive income taxes at greater than 50%; or,
…wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Are you overlooking tax-saving strategies like cash damming and the Smith Maneuver to turn your mortgage into a powerful wealth-building tool? In this episode, we break down how debt, when managed strategically through methods like leveraging HELOCs and converting non-deductible debt, can minimize income taxes, increase passive income, and optimize your real estate investments. From Canadian investing strategies to infinite banking with whole and universal life insurance, discover how smart debt management not only reduces tax liability but also supports long-term estate planning and financial growth. Listen in to learn how to make your debt work for you!

Ready to connect? Text us your comment including your phone number for a response!

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.