I talk to a lot of people who are earning really good money. Two, three, sometimes four hundred thousand dollars a year. And a surprising number of them still feel behind financially.

After going through their numbers, I’ve noticed something that honestly shocked me at first. A lot of them are handing the CRA somewhere between $20k and $30k every single year that they didn’t have to give up. It’s not because they made some reckless decision, it’s because nobody ever sat down and walked them through how taxes actually work at this income level.

If you’re a physician, dentist, or business owner here in Canada, you have what I like to call a silent partner. And that partner takes about 53 cents of every extra dollar you earn. The difference between people who build real wealth at high incomes and people who stay stuck is understanding that your tax bill isn’t a fixed cost. It’s a variable one. And it can be managed.

Today I’m going to show you the three biggest tax leaks I see over and over again, and exactly how to plug them.

Part One: Asset Location

Most people have heard of asset allocation. That’s your mix of stocks, bonds, cash, and so on. But there’s actually a more important concept that almost nobody talks about. It’s called Asset Location. And it’s about which investments you hold in which accounts.

This might be a surprise for a lot of people; in Canada, not all investment income gets taxed the same way.

Interest income from something like a GIC or a bond fund and rental income gets taxed at your full marginal rate, which depending on your province can be as high as 54%.

Foreign dividends from something like US stocks or international stocks also get taxed at your full marginal rate, although there’s a foreign tax credit you may be able to claim.

Canadian dividends get treated a bit better because of the dividend tax credit, but they can still create some complications. For earners in the top tax bracket, you get taxed around 37% on additional dividend income.

And then capital gains sit at the most tax-efficient end of the spectrum, where only 50% of your gain gets added to your taxable income. So it’s taxed at 27% at the top marginal rate.

Here’s the mistake I see constantly. People hold their safe investments, things like GICs and bond funds, in their non-registered accounts because they want the flexibility and liquidity. And then they put their growth-oriented investments inside their registered accounts like TFSA and RRSP. And I completely understand the logic. You want your emergency fund accessible. You don’t want to lock everything away somewhere with tax consequences if you need it.

But here’s where the math starts to hurt. Say you’ve got $200k sitting in a GIC paying 4%. That’s $8k in interest income every year. If you’re in the top BC tax bracket at 53.50%, the CRA is taking $4,280 of that. You’re left with $3,720 after tax. And at that point your real return is only 1.86%, which is below the pace of inflation in Canada. Your purchasing power is effectively shrinking.

If you move that $200k GIC inside your registered accounts like RRSP or TFSA, provided that you have the contribution room, where the tax on growth is fully sheltered, you pay $0 in taxes and you save $4,280/year.

Say your RRSP and TFSA are already maxed out, and after thinking it through, you only actually need $50k of that in a liquid, accessible emergency fund. The other $150k? That’s long-term money. You don’t need to touch it for 15 or 20 years. You can redirect the remaining $150k into a diversified equity ETF portfolio in your non-registered account. Here’s what changes: that ETF portfolio isn’t generating taxable interest income every year. It’s mostly growing through capital gains, which most of them get taxed when you sell, and even then only 50% of the gain counts as income. So instead of paying roughly 53.50% tax on $8k of GIC interest annually, you are reducing your annual interest income to only $2K, and pay only $1,070 in taxes—that’s $3,210 in annual tax savings. You’re also increasing the growth of the remaining $150K AND deferring most of that tax on the growth for years, sometimes decades. If we use 7% return as an example, over 10 years of compounding growth the difference in after-tax wealth is over $100K.

Stay with me, because the fix here depends on your situation.

If you’re genuinely a conservative investor who needs the safety and predictability of a GIC, absolutely keep it. But try moving it inside your registered accounts where that interest income is fully sheltered from tax.

But if you’ve got a long time horizon, say 10, 15, 20 or more years before you need this money, you might want to rethink the whole approach. A well-diversified portfolio built around capital gains—things like low-turnover index funds or growth-oriented ETFs—held in your non-registered account would only trigger tax on 50% of your gains, and mostly only when you actually sell.

Part Two: The CCB Clawback That Nobody Talks About

Okay, this one genuinely surprises people when I bring it up.

Most high earners don’t actually know how Canada Child Benefit or CCB works. They think “I make too much, that’s not for me.” But that’s actually not true, and this assumption is costing a lot of families thousands every year.

The CCB doesn’t just cut off at a certain income level. It phases out gradually based on your Adjusted Family Net Income and the number of kids under 17 you have. Adjusted Family Net Income is your gross income minus eligible deductions like company pension plan, RRSPs, professional dues, child care expenses, moving expenses, interest expenses, employment expenses. So even at household incomes of over $250K/year you might still be eligible for some benefit.

The math depends on exactly where your Adjusted Family Net Income lands and how many kids you have. So let me give you the actual numbers for the 2025 tax year.

The first clawback threshold kicks in at $37,487 of adjusted family net income. Once you cross $81,222, a second higher clawback rate applies. For a family with one child, the reduction rate is 7% in the first range and 3.2% above it. For two kids it’s 13.5%, then 5.7%. For three kids it’s 19%, then 8%. And for four or more kids it’s 23% in the first range and 9.5% above it.

Here’s an example. Let’s say you and your spouse have two young kids and one spouse is staying at home and the other spouse is making a gross income of $250k. At that income level you’re already past both thresholds, and your marginal tax rate is at 45.80% in BC. So the 5.7% clawback rate applies to the income above the threshold and additional income you earn. Stack that on top of your marginal tax rate, and your effective marginal rate on the next dollar you earn is actually over 50%.

Now here’s the interesting part. If you make a $50k RRSP contribution that brings your Adjusted Family Net Income down from $250k to $200k, two things happen simultaneously. You defer roughly $23k in income tax at your marginal rate. And because your Adjusted Family Net Income just dropped by $50k, your CCB payments go up. For a two-child family moving from $250k to $200k in AFNI, you could recover $2,850 in additional CCB payments. So that single RRSP contribution is doing double duty. It’s cutting your tax bill and increasing a government benefit you were essentially leaving on the table.

Part Three: The Corporate Passive Income Trap

This tax leak is specifically for the incorporated professionals and business owners watching this.

The old advice you’ve probably heard goes something like this: pay yourself just enough salary to cover your living expenses, and take the rest as dividends. And for a long time, that advice made sense. But there’s a critical piece of context that often gets left out.

Here’s the distinction: if you pay yourself a dividend from your corporation into your personal account, that money is out of the corporation. You can invest it personally all you want and it has zero impact on your Small Business Deduction. Small Business Deduction is a lower tax rate at 9-12.5% depending on the province you live in, you get to enjoy as a business owner if your business net income is under the $500K limit. Net income above $500K is taxed at a general rate of 26-27%.

Now if you have excess cash sitting inside your corporation and you invest that money within the corp, generating interest, dividends, or rental income, that’s when a specific tax rule called the Small Business Deduction grinding rule kicks in.

Here’s how it works. If your corporation earns more than $50k in passive investment income in a given year, the government starts reducing your small business deduction threshold. For every dollar of passive income above that $50k threshold, your business limit drops by $5 from the $500K limit. Once your passive income hits $150k, your small business deduction is completely gone.

And that matters enormously because your regular business income that should be taxed at the low rate of 9-12.5% suddenly starts getting taxed at the general corporate rate of 26% to 27%. That difference is an additional $67,500-$90,000! I’ve seen this passive income trap create a large surprise tax bill for business owners if not planned ahead.

On a side note, there are also two other things that get overlooked in the salary versus dividend conversation. First, if you only take dividends and no salary at all, you’re not generating RRSP contribution room. No salary means no RRSP room, full stop. Second, you’re not contributing to CPP. And while avoiding those contributions feels like a short-term win, you’re also walking away from a guaranteed inflation-indexed pension for the rest of your retirement.

The real fix here isn’t a simple salary versus dividend answer. It’s building a proper compensation strategy that accounts for your RRSP room, your CPP contributions, your personal tax bracket, and how much passive income is accumulating inside your corporation. This is the kind of planning where your accountant and your financial planner genuinely need to be working together.

The Real Solution: Move From Tax Filing to Tax Planning

So what actually ties all of this together?

Tax filing is looking in the rearview mirror. It’s based on what has already happened. Tax planning is looking through the windshield. It’s proactive, it’s strategic, and it happens before the damage is done.

What a high-earning family actually needs is advanced tax planning. Tax planning answers three specific questions. Where is your income coming from; is it through employment or your corporation, or both? Where are your investments actually sitting; is it in the most tax-efficient account for that type of investment? And how are you managing your adjusted family net income to maximize government benefits and minimize clawbacks?

When you have robust tax planning, you gain more clarity and your money stops leaking.

Look, if your tax bill is currently your single largest household expense—bigger than your mortgage, bigger than your lifestyle spending—you have to stop treating it like it’s fixed. It’s not. It’s variable. And with the right planning, it can be managed down significantly.

In my next video I’m going to show you the biggest asset building mistake I see high earners make in Canada. This one’s costing people hundreds of thousands in wealth they could be building right now, not decades from now. And most people have no idea they’re even making it. I’ll see you there.