Tax Time 2018: Reminders For Anyone Who Owns Property & Files Taxes In Canada

Well, it's mid April and the weather is (finally) starting to break. This means tax season is in full swing and hopefully most of you have finished your bookkeeping and begun meeting with your tax professional. Today we are going to share a couple real estate related reminders that may apply to your tax situation this year.

Reporting the Sale of Your Principle Residence

Up until the end of 2016, when you sold your personal residence, you didn’t have to report the sale on your tax return. In 2017, this rule changed; going forward you are required to both report any principle residence sale and to designate which property (if you own more than one) is your principle residence. For more info on this check our past blog post of the subject here.

Home Office Expense

Are you self employed? Do you have a home office? You’re most likely entitled to a deduction related to this. To use an example: Say you own a home that is 1000’ and you use one of the bedrooms exclusively as a home office and it's 100’. Therefore, 10% of the home is a home office. You would be entitled to deduct 10% of your expenses related to the home. Examples of expenses in this case include mortgage interest, property taxes, utilities, insurance, condo fees/HOA, etc.

Mileage – Automobile Expenses

Do you own an investment property or properties? Do you have to drive around to manage them? Whether it be for repairing something, collecting rent, showing vacancies, etc, you are entitled to a deduction related to automobile expenses you are incurring to earn that rental income. That can be expenses such as gas, repairs/maintenance, lease payments, etc. Now in this case, it's important to track your mileage for when you are using your vehicle for these investment property purposes—a portion of your auto expenses will be a tax deduction.

Depreciation

Here is one topic that is often misunderstood. On investment properties, you are able to depreciate the value of the building (excluding the land) and that becomes an annual expense against rental income (up to a maximum of 4% of the building value). It basically lowers your book value by the amount of deprecation you take, so it acts as a tax deferral more so than a deduction. You end up paying less income tax yearly on your rental income but end up with a bigger capital gain down the road when selling. Some investors do it and some don’t, but tax deferrals are generally beneficial as a tax planning tool. For more info on this topic see our previous posts on the subject here and here.

We are not tax professionals in any way, so we would defer to your tax professional’s advice on any of these subjects and how they relate to your personal situation. We hope this is a helpful checklist as you file this year. Happy filing! ☺