This week’s Meet the Expert interview features Cam Kroeker, CPA, CA, Senior Manager with Magnus Chartered Professional Accountants LLP. Cam provided some fantastic insight and advice for people with investment properties when it comes to tax time (right around the corner!).
- Where do I start when it comes to taxes and investment properties?
Just to start finding information, your best bet is probably what you’re already doing – google it! This will point you to the CRA website which contains plenty of information on what you can include on your personal tax return as a deductible expense. From an income standpoint, you should report all rental income received.
2. What are some eligible expenses for people with investment properties?
Eligible expenses are expenses you’re incurring to earn that income. When you think of a rental property, think of everything you’re doing to bring in income: advertising, paying insurance, property taxes, interest on your mortgage (only the interest portion), repairs and maintenance, etc. Keep track of what you’re putting into the rental throughout the year – you may be asked for receipts and invoices down the line.
- Should you incorporate?
If you’re incorporated, there is a lower tax rate you can receive from business income, however when it comes to passive investments held by a corporation, they’re treated differently. So if you had a rental property in a business, it’s not going to get the same tax rate that you might think – it will actually get a higher tax rate closer to what it would be taxed personally. So should you incorporate? The answer is maybe. The advantage is that a business may already have money to invest into a rental property, while if you’re investing personally, you have to pull out the money which you will be taxed on before you can invest it.
- What’s the difference between current expenses and capital expenses?
Current expenses are expenses that you would claim to the full amount in the current year, while capital (also known as depreciation) expenses are attributed to the overall cost of the rental property and can be deducted over the life of the property. Cam encourages people to deduct their capital expenses every year.