excellent explaination, no side personal stories, no distraction. (y)

Yassss! Have been waiting for this!

Well explained. Thank you for your hard work even on vacation.

Appreciate the detailed calculations in the video. Even more beneficial for those in a higher tax bracket.

well described and explained. thanks!

Very timely video. Considering this right now.

Great video! Thanks for this info. I like the idea of using a HELOC for other investments.

👏🏽👏🏽 good stuff Jacky!

We've been using the smith maneuver for some time now. We use it for our rental properties and now our stock options trading accounts as well.

@jackykuk2458

2 жыл бұрын

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Watched and liked, thanks! Great advice, but the thing I think you missed is the taxable event that occurs when you sell stocks. That really wasn't covered too well. Other than that everything else made sense.

Great video! It's important to note that not all investments qualify for this strategy. They must be income producing investments like dividend stocks, bonds, or real estate. Investing in growth stocks like Tesla with no expectation of a dividend will not qualify.

@JackyKuk

2 жыл бұрын

Yep that is correct, thats why everyone need to talk to CPA before implementing this

@TruthAboutRealEstateInvesting

2 жыл бұрын

I believe trading stock options counts, to add an obscure strategy to that list.😉

@bhaalgorn

Жыл бұрын

According to a smith professional, as long as you can REASONABLY expect dividends at some point, it's fine. Tesla doesn't give dividends but at some point in the future they might, so it qualifies

Yes Robinson Smith’s father he discovered this little glitch in the tax laws

Individuals can write off interest on mortgages or do you have to set up a company?

Thanks for the great video. Very informative. On the lump sum swap scenario, would it still make sense to do if you are going to pay capital gain tax when you sell to swap?

@JackyKuk

2 жыл бұрын

Depends on the cap gain, it could be a layered swap over multiple years

Great video Jacky! Just wondering, does this need to be done with a readvancable mortgage/HELOC? Could you do it with a second mortgage segment instead (benefit being the lower interest rate)?

@JackyKuk

2 жыл бұрын

Yea you could

From what I know, interest on HELOC invested in non-registered is deductible only when it's invested in Canadian securities. I don't think they deduct taxes when it's invested in, say, S&P 500 ETF. Plus, there's capital gain tax when you sell your stocks. Wouldn't it be better to invest in TFSA? or is it because TFSA has room limit?

@retiredworkingforyoureplie7011

2 жыл бұрын

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Thank you for the video 😄 Any chance we could have access to you spread sheets one day? In order for us to run our own numbers and be able to make better decisions? It's one thing to hear about and understand the principles however, much easy to actually run it hands on to better understand and see if it fits 😊 And I mean access to all spread sheets for all different strategies that you have been teaching us through your videos 👍 Thanks 🤗

@JackyKuk

2 жыл бұрын

I can. try fixing it up and uploading, just takes long time to make it fully automated

@gaila.8830

2 жыл бұрын

@@JackyKuk awesome, thanks 👍 No worries about timing 😁

does the limited HELOC draw period (ex. 10 years) limit this strategy or is there a way around that?

@JackyKuk

2 жыл бұрын

Usually they put 15 years but that should be fixable by rolling HELOC forward

Great video. Curious of your thoughts on cash-damming as a similar/alternative?

@jackykuk3470

2 жыл бұрын

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I would agree with you that a normal leverage investment does amplify the risk. But with the smith maneuver the real risk is just you being able to pay the interest. If you just put it all into dividend blue chip stocks like CN for 10+ years, there is virtually zero risk.

@JackyKuk

2 жыл бұрын

while that is correct the problem would be interim if interest rate hikes up 2% and then your blue chip enters a down market like now. Many homeowners may be pressured to sell at a loss thus incurring debt

@ApplePotato

2 жыл бұрын

I think the key is to start out small and reinvest all your dividends. Let it roll and snowball. As you get more comfortable than put in more. In the case of a rate hike or your blue chip drops, don't panic sell. Just stop reinvesting the dividends and use that to cover the interest payments.

Thank you, Jacky, for the thorough explanation of this technique, including illustrative examples! I have a question: I think we only get the tax deduction on HELOC interest if we sell the stocks we invested in. If that's the case, is it a good idea to sell stocks at the end of each year, even if it means dealing with capital gains?

@JackyKuk

6 ай бұрын

no you get tax deduction as long as you purchase an asset that creates income, you do not need to sell

@MLTechTrack

5 ай бұрын

Thanks @@JackyKuk ! Is this correct that the investment "has to" be in dividend stocks and we cannot invest in, say QQQ, to be able to deduct the HELOC interest?

I did not know that the interest from a HELOC when used for a non-registered investment can be a tax write off. Not sure why it never occurred to me since I write off the HELOC interest for purchasing a rental property. I’m still a little unsure why it needs to be a non-registered investment to get the tax write off’s for interest. Is it because taxation on the growth is deferred for RRSPs and nonexistent for TFSAs?

@JackyKuk

2 жыл бұрын

No write offs for tfsa or rrsp

Thanks for educating. So, looks like this strategy is not fit for retiree investment as it leverage the tax reduction to get higher ROI on investment using margin leverage. This is a bit risky for retirees. Correct? Thanks.

@JackyKuk

2 жыл бұрын

it's still fitting depending on your goal, for example melting RRSP down can be a purpose to do this

There is an error in your description of the strategy. The strategy first transfers the amount from Heloc to a separate bank account which then pays the interest on the HELOC. Then the remaining funds are transferred to the investment account. In this way, there is no additional cashflow required by the homeowner. In the method that you describe, the homeowner would have to come up with the interest payment from other funds each and every month. This may be reasonable at the beginning, but in the final years of the mortgage you would be making the full regular mortgage payment, plus having the cover the monthly interest on a HELOC with a balance of nearly 500k (per your example at 2.95% and 495k HELOC, this would be $1,205 of interest). Per CRA's guide on interest - "Where money is borrowed, the use of the money must be established and the purpose of that use must be to earn income. Borrowed money used to acquire a life insurance policy or property the income from which would be exempt will not qualify." This is the reason that investments into an RRSP, TFSA or Life insurance policy wouldn't be deductible, since the income that gets created within them is tax-exempt.

@JackyKuk

2 жыл бұрын

Yea so while projection goes 25 years most likely you wont be doing it for that long

@ApplePotato

2 жыл бұрын

You are correct. But imagine you are making 6% to 8% a year, and you did the smith maneuver for 22 years. The amount of money you have have make with the initial 200k loc would be 400k before tax. If you take out more from the heloc as you go, you would have made more than a mil before tax. At that point the extra 1.2k interest will be peanuts.

I wanted to know can you use these principles to borrow from your heloc and invest into a Corp to do real estate investing?

@JackyKuk

Жыл бұрын

Yes but likely not much tax benefit

great effort but still difficult for me to understand, forget about implementing it. you need to start offering consulting to set this up for people

Isn't there usually a limit on the lump sum payment you can make towards your mortgage (like upto 10%)?

@Motiahmed330

Жыл бұрын

You will need to have a specific mortgage product like bmo readiline or the scotia bank step that is mentioned in the video. Limit usually is 20%

hey do you know if anyone does it for gold? like take a line of credit for 10, 20k and buys gold, uses the interest expense on their taxes (woudnt it qualify, is it just more of a hassle to pull off?)

@JackyKuk

27 күн бұрын

Cant write off because gold does not product income regularly

@frapeyou

27 күн бұрын

@@JackyKuk what if you got the gold and loaned it at an % rate, would that then work?

@JackyKuk

26 күн бұрын

@@frapeyou Maybe... just kinda weird and convoluted in my opinon, and also you would have to report income on it and that kind of nullify the whole thing

I've a confusion - after tax cost of borrowing should be higher than after tax return on investment or before tax return on investment for the strategy to be profitable?

@JackyKuk

8 ай бұрын

you shoudl look at both after tax since they neutralize each other

@MS-up1rc

8 ай бұрын

@@JackyKuk thank you!

Pretty sure its from the 80s, maybe his sons book was from 2002?

you did not considered dividend or income of stock investment is a part of your additional income

I don’t understand when you say that you are reinvesting. Where re you reinvesting ?

@JackyKuk

2 жыл бұрын

a side investment account

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@hazelzoey9913

2 жыл бұрын

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yeah i'd pay it off my mortgage faster if variable interest rate wasn't killing me!!! anybody know if those wankers over at Bank of Canada will stop raising interest rates???? i'm about to default on my mortgage if this shit doesn't stop seriously

I call bullshit..

@jackykuk2458

2 жыл бұрын

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