It seems so easy at first glance! We are preparing to complete our tax return when the accountant suddenly brings us back to earth. “Careful, you’re not really a co-owner in the legal sense of the term.” What? “Another thing, about the old building you purchased, the cost of renovations may be a capital expenditure.” What? “Before I forget, did you know that the money you spent to advertise your space for rent is generally considered a tax-deductible expense?” What?
The temptation is strong to just give the accountant all your papers: “Here, take care of it. It’s too complicated for me!” and wash your hands of it. Then doubt sets in as you lay on your pillow that night. No, you tell yourself, I have responsibilities as an owner, and I will assume them. It’s my duty to understand a minimum of what there is to understand.
If you’ve reached this stage, type the words Canada Revenue Agency in your Internet browser. The bureaucrats have done most of the work for you. Why not take advantage of it? At least for the federal tax return.
Example: this document concerning rental income. If you take the time to think about it, it will help you to calculate your gross rental income, the expenses you can deduct, your net rental income or net rental loss for the year.
The agency will slowly help you clarify your thoughts on different subjects: the definition of a primary residence, eligibility criteria to declare an uncollectable rent an expense, the tax consequences of adapting a rental property to the needs of handicapped people or renting rooms in a house, mortgage brokerage fees and the agent’s fees.
And many other subjects.
Once you select your language on the Agency site, it guides you through forms, interpretation bulletins and information circulars. And what’s really wonderful is that the agency avoids your falling into the trap of legal definitions. Remember: co-owner or not?
Reference: Agence de revenu du Canada, document CRA-ARC Revenus de location
Photo: iStockphoto.
