Date: January 17, 2024

Category: Blogs,Mortgage Tips & Advice

Self-employed people, this is for you!

Today, our focus revolves around self-employed income!

Many individuals opt for the self-employed path due to its potential for greater financial rewards. While this is often true, we tend to overlook the distinction between gross income, net income and type of income.

Let’s look further into the various common forms of self-employed income. It’s crucial to recognize the diversity within self-employment, each with its unique methods of income reporting. I want to preface this by stating that I’m neither an accountant nor providing advice. However, it’s vital to comprehend that while your expert accountant might reduce your $150,000 income to $20,000 for tax purposes, they may inadvertently impact your mortgage qualification and lead to higher mortgage rates. It’s a bit of a trade-off scenario and one you need to understand before you make a decision.

Here are the fundamental types of self-employment:

Sole Proprietorship:

  • Ownership: Solely owned and operated by one individual.
  • Taxation: Income is typically reported on the owner’s personal tax return.

Partnership:

  • Ownership: Shared ownership between two or more individuals or entities
  • Taxation: Profits and losses pass through to individual partners, who report them on their personal tax returns.

Incorporation:

  • Ownership: Owned by shareholders who hold shares of stock in the corporation
  • Taxation: Corporations are subject to corporate income tax, and shareholders may also be taxed on dividends received from the corporation.

There are advantages of one over the other, but your personal situation needs to be considered.

I bring this topic up today to inform you that there are different ways to confirm self-employed income. With tax time upon us, we must connect and review your numbers to plan for a home purchase or refinancing coming up in the next 1-2 years.

I would be happy to go into more depth with you and discuss your personal situation.

Reach out, and let’s review. 

Talk soon, 

Ana

Mortgages can be complicated; we are here to help you make “cents” of it.

We focus on Mortgage Solutions, Period!

To learn more connect with Ana Cruz 905.870.0513 or email at ana@askanacruz.ca