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Of interest, if the family’s income were $30,000, then their CCB would be $16,200, tax-free.

In addition, they would probably see another $1,000 to $2,000 in benefits around GST credits, Ontario property tax credits, Ontario health premium and medical expenses. Let’s say their extra benefits from this low income are $17,700 for the year, tax-free. This is on top of having a very low tax rate. That could be a huge benefit for this family.

The only problem is that this family doesn’t make $30,000 in family income. They make about $220,000. So, how do they make $30,000 and, even if they make $30,000 in taxable income, how do they fund their $180,000 lifestyle?

A new for 2016 strategy for this family is as follows:

1. Pay themselves a combined income of $30,000, using dividends from the company.

2. Put a home equity line of credit in place on their home. Since it has $1.7 million of real estate equity, and their income has been strong, they can likely get a $1 million line of credit priced at Prime + 0.5 per cent, which today is 3.2 per cent.

3. After their $30,000 draw and $17,700 of tax benefits, they will still need to draw over $100,000 from other sources to fund their lifestyle. They would defer RRSP contributions. Year one they would borrow the funds from the corporation at one per cent interest.

4. In year two, they would do it all again, but this time they would need to borrow from their line of credit to pay back the corporation, and to fund year two expenses. They now have a line of credit loan of $218,000. Fortunately the 3.2 per cent interest rate is much lower than any tax rates, and the interest costs are easily covered by a portion of the extra tax benefits. Interest rates could rise on the line of credit, but look stable for a while. We have assumed 3.5 per cent as an average interest rate.