Do You Make Money Off Your Property?

Do You Make Money Off Your Property?
A lot of people have been feeling the pinch financially with the economy the way it is, and as a result have been forced to look for other ways to pad their income so they can make ends meet. For some it has meant renting out part of their residence just to help cover the costs of owning a home, and no real intent on making a profit was the priority. Yet this sort of endeavor must be claimed on your Canada taxes as well. In the eyes of the CRA it is income.

While you must claim this as income, you will also be entitled to claim some related expenses against this income that occurred as a result of your renting out this space. Perhaps the rent you are charging includes the utilities, for example. You can calculate what these costs are for the utilities and use them as an expense against the income you are collecting for the rented space.

Then perhaps you own a cottage and are trying to decide if you would be further ahead to sell it, or to try and glean some income from it by renting it, or maybe move into it and make it your primary residence, so you could sell your current one. Each of these decisions has some form of tax implication.

If your cottage has been used primarily as your second home and just for your entertainment then it is considered personal use property. If you decide you are going to move into it on a full time basis then it has no deemed disposition. This means at this time it has no effect in regards to capital gains or losses in respect to your income tax filing.

On the other hand if you make the decision to start renting it out as a potential source of income then now it becomes classed as rental property and comes under deemed disposition. In the eyes of the CRA you are looked at as having disposed of the property then immediately reacquiring it at fair market value. This can now have a direct effect on your taxes by way of capital gains, or perhaps a capital loss.

It may be frustrating for you when you have worked hard for your property and now you have to consider the tax implications that may arise from what you do with it, especially when you are not really selling it.

Be sure to check out our educational video on renting part of your home, as it will give you some greater insight.


At Sam Seidman, CA here at Toronto Accountant we believe in working hard on your tax affairs to ensure you only have to pay the taxes that you owe and not a penny more. Plus, we go the extra mile in seeking out all of the tax breaks and incentives that may be available to you.   Contact us now so you can feel good about putting your tax matters in our hands.


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