Today we are talking about all things tax-related (FAQ about tax), as we are now in the midst of the tax season. Here are some common questions and answers many real estate investors and home owners have related to their homes and investment this tax season.
Q&A For Investment / Rental Properties Income
What about rental income If the tenant did not pay rent in last year and made up for the rent in the current year?
The landlord and tenant should figure out a payment plan for missed rent, so the new rental income from last year should be included in your rent for the current year.
What about rental losses?
You can use the T776 form to claim. The rental loss will be taken off the total income Paralegal fee, legal fees, and operating expenses should be part of that loss
CERB/ CRB / CRCB/ CERS / Worker Lock Down Benefit / EI?
If you are in a tax bracket that is taxed above 10%, you could potentially be taxed or have tax owning. If you have received you should received a tax clip for those incomes
Is it too late to claim a benefit from 2023?
No it is not too late
Professional Services Fees and Other Expenses
Can I deduct property management fees?
Yes, absolutely, you can deducted property management fee from the category from professional services.
What if I sold the property can I deduct the realtor or lawyer fees?
Yes you can as part of professional services.
Home Inspector Fee
A cost incurred to acquire the property, that will be added to the value of the property?
Can we claim insurance deductible if landlord has to fix a damage caused by tenants?
What about fuel used to travel to and from rental property?
To be any expense that has to do with the vehicle, you have to track the mileage of the vehicle. CRA will ask for your log book (how many km on the start of the year, and how many km at the end of the year, must be itemized), gas maintenance, registration, and repairs.
What about fuel bought for my lawnmower?
100% of the fuel for that lawnmower can be tax deducted since it is part of maintenance and repair for the house
What if I purchased new appliances for thousands of dollars
You can remove that new purchase appliance cost from your value of your house, so you can reduce the capital gain when you sell the property
Working From Home
Can I claim home office expense for management of my rental properties? If yes, what can I claim, and what percentage can I claim?
Must have support and documentation to backup this, then yes you can. For instance, if you are using an office to manage all your properties. Tell CRA size of your home, size of office, and give them total for all of expenses. Electricity, Heat, Gas. Take the percentage your office uses and put into your expenses. Catch is if you only have 1 property, how much time does that property actually uses, so must be able to support that with data or documents!
For WFH when should I be using detailed method vs $2/day method?
Usually when rent is involved, it is better to use detailed method
Depreciation and Mortgages
How does depreciation affect my taxes?
Eligible to claim 4% of depreciation (up to $4000) If you’re rental income is $4000, you can claim $4000, and also claimed for future tax returns The catch is when you sell the place, when you sell the property you will now have to pay taxes on that $4000. If you sold for profit, you will likely be bumped up to the highest tax bracket. Speak with your accountant
What if there has been changes with my mortgage?
Eligible to deduct those, reach out to professional to spread it out over the term of the mortgage instead of only using it for a single year.
How do we claim mortgage interest? As expense?
Qualifying home – Must be registered in your and/or your spouse / common-law partner’s name in accordance with the applicable land registration system and located in Canada. Includes existing homes and homes under construction.
The $5,000 can be split between the house owners as long as the total amount claimed on all tax returns doesn’t exceed $5,000. The credit is claimed on line 31270 on your tax return
Pre-Con Condo Questions about tax
My friend bought a pre-sale condo, but the developer cancel the contract, and return deposit in full. Should the expenses incurred for buying the pre-sale condo be treated as capital loss (50% inclusion), or 100% inclusion as a loss?
This depends on the intent of purchasing the condo if it is to live in it, flip it, or rent it out. Must provide documentation to back it up.
Wrapping it up
As you can see, tax deductions go much further than property management fees and repairs and can end up in a hefty tax return. Thanks for the liv team, for making these questions possible. If you’re ever unsure about what you can, can’t or should claim, consult with an CPA accountant (by the way that’s a deduction too!).
If you have an investment property and want help maximizing the investment return or if you are just an owner of a single property and want some guidance on all things property management reach out to the Refinity Homes team. 604-337-2733 or email us email@example.com