5 Tax Loopholes Wealthy Canadians Use — That You Can Too

Oct 3

3 min read

Most people think the wealthy are doing something shady to avoid taxes.

But here’s the truth: the ultra-rich in Canada aren’t breaking the rules — they’re simply playing by rules most people don’t even know exist.

And the best part? You can use the exact same strategies.

Today I’m breaking down 5 powerful tax loopholes that wealthy Canadians use to grow their wealth faster, pay less tax, and protect their money — all 100% legally.

Loophole #1 – Tax-Free Dividends to Holding Companies

Let’s start with one of the most underused strategies by small business owners — and one of the most common tools used by millionaires: inter-corporate dividends.

Here’s how it works:

If you own multiple corporations — like an operating company and a holding company — Canadian tax law lets you move profits between them tax-free.
This is called the inter-corporate dividend deduction.
Essentially, Company A can pay a dividend to Company B without triggering any tax on that money.

Why does this matter? Because now you can move profits out of your operating company and into a holding company, or pool capital to invest in real estate, stocks, or other businesses.

💡 Wealthy Canadians use this to separate cash from risk, reinvest on their terms, and build multi-company wealth strategies — and you can too.

Loophole #2 – Reinvest in Your Own Business

The second “loophole” is hiding in plain sight: reinvesting into your own business.

Most people think profit should go straight into their pocket. Wealthy business owners think differently — they see profit as fuel for next year’s growth.

If you invest $30,000 this year into marketing, hiring, or new services that increase revenue by $100,000 next year… not only does that $30K become a 100% deductible business expense, but you’ve created significantly more taxable income in the future — on your terms.

The CRA encourages business growth — so reinvestment reduces this year’s tax bill and builds next year’s revenue. That’s why the wealthy don’t just spend — they strategically reinvest.

Loophole #3 – Pay Your Kids a Tax-Free Salary

This next one is a family favourite — and perfectly legal if done correctly: paying your children through your business.

If your kids legitimately work in the business — maybe they do social media, organize files, help with admin, or clean the office — you can pay them up to about $15,000 per year.

Why this matters:

For them, that income is completely tax-free (because it’s under the basic personal exemption).
For you, it’s a 100% deductible business expense — reducing your taxable income.

It’s a win-win: you move money from a high-tax bracket (you) into a no-tax bracket (your kids) and teach them about business and money along the way.

💡 The key: they must actually work and be paid a fair market wage for the tasks they do.

Loophole #4 – Set Up a Family Foundation

This one’s next-level, but it’s a big reason why many wealthy families pay far less tax than you’d expect: private charitable foundations.

By setting up a registered family foundation, you can:

Donate money from your corporation (and receive a tax deduction).
Control how and where those funds are distributed — often to causes you care about or even programs you run.
Reduce corporate tax and create a long-term legacy vehicle for your wealth.

Think of it as “giving with benefits.” You’re investing in causes relevant to your own lifestyle and important to your family and friends, all while reducing taxable income, and keeping influence over how those funds are used — all within CRA rules.

Loophole #5 – Buy Real Estate for Tax Write-Offs + Tax-Free Leverage

The final loophole is one of the wealthiest Canadians’ favourite wealth-building tools: buying real estate through their corporations.

Why? Because real estate does two powerful things for tax strategy:

1️⃣ You get to depreciate the asset (CCA) lowering your taxable rental income.

2️⃣ Instead of selling and paying capital gains tax to access your equity, you can borrow against the property. Real estate is one of the easiest assets to borrow against through a home equity line of credit (HELOC).

BONUS: you can re-invest all the excess rental income into paying off the mortgage faster and grow the equity even faster.

That means you’re pulling out debt — not income — and the CRA doesn’t tax debt.

💡 It’s one of the most powerful ways the wealthy turn equity into tax-free capital to invest in other businesses, real estate, or even financial markets.

Here’s the thing: These strategies are all written directly into Canadian tax law — and the wealthy just take the time to understand and use them.

You don’t need millions to start either. Even as a small business owner, you can: