Buying my residence through a corporation.
Please read the post before making up your mind. Thank you in advance for any advice. I am going to visit an advisor as well but I want to hear what you guys have to say as well.
I’m about to earn nearly $2M as a one-time income. It can legally be earned either personally or through my corporation. The corporation has no other income this year. The income will qualify for the small business rate (for the first $500k obviously).
I already have a house. I will keep this house, put it up for rent, and move into a new house that I plan to buy with my income.
Here are the benefits I see for earning and buying the house through my corp:
- I will pay about $500k in income tax, rather than $900k if I take the money personally.
- The money will never leave the corporation, so no personal taxes are paid.
- I will pay fair market value rent, and even at that point, I will barely have corporate rental/passive income profit due to the interest writeoff being so high. Plus property taxes and maintenance chip off some too.
- I will pay the “rent”/mortgage using other income sources, so no dividends are being taken and taxed.
- If I get sued for some reason, I still have another house.
- The capital gains benefit is not that high to create a big difference. Let’s say I buy at $3M and sell at $3.8M. The capital gains on that are about $100k. The total tax bill is still much lower than the personal (non-corporation) route.
As long as the money never leaves the company, is this a good idea? I defer/save on a lot of tax.
I know it’s usually not a good idea but I am not seeing any flaws in this due to my specific situation.