Top Tax Tips for Rental Properties:
Investing in Real Estate can be a great way to increase your net worth. If you are thinking of becoming a landlord, there are many factors outside of the property to consider. Because it is tax season, I reached out to Michelle Bjarnason of Stone Creek Accounting for her top tips for your investment portfolio:
- Do I need all my gas receipts? Absolutely. I’ve found, the number one thing people tend not to realize is that logbooks and gas receipts must be kept in order to use their vehicle as a tax write off (deduction). Logbooks must have the date/km driven for the rental property and the total km driven in the year for all purposes. If you own only one rental property, you can only write off your vehicle costs when you have completed repairs/maintenance on the rental property. Unfortunately, CRA does not allow a per km, Diem, for rental/business income.
- Own a property in another province? Travel, including, airfare, gas, and rental vehicle rental is also a write-off but as above, you must complete the repairs yourself. Unfortunately, meals and hotels are not allowable deductions. And no, sadly, you cannot deduct your own labor costs.
- Own more than one rental property? Different tax rules apply to you to allow more write-offs!
- Upgrading and turning your family home into a rental property? The best thing to do is determine the value of your home when you switch it to a rental property, with paperwork as proof such as a tax assessment. When the property flips to rental property CRA treats it as if you have sold it. Down the road, this paperwork will come in very handy to avoid unnecessary capital gains taxes. Some capital gains tax is usually unavoidable but let’s not pay more than we absolutely need to.
- Renting your property out because your employer made you relocate? There are tax rules around that to avoid capital gains taxes.
- Bought a property as a single person and now married? Want your spouse to share in the rental income? The person or person's name that is on the title is the person who must declare the income and subsequent deductions. Unfortunately, sharing is not allowed in this case.
- Lost money renting out the property this year? Don’t worry, all is not lost. The loss on your rental income will reduce your earnings for the year from other sources, such as employment and business.
- Need to get a mortgage for the rental? Is that a write-off? Absolutely, the interest you pay on your rental property’s mortgage is a write-off. However, the capital portion of the payment is not.
As always, should you be interested in having your taxes prepared by a professional to maximize your deduction and file worry-free, please feel free to give me a call at (780) 951-5215 or email: email@example.com
Cheers! And welcome to being a landlord!