Tips to Save Taxes on Rental Properties in Canada

Rental Properties in Canada

Saving rental taxes have become an important concern as people find a lot of their income eroded while paying taxes in Canada. If you are unsure of how this can be done, search tax accountant near me to get in touch with a tax accountant who might be able to help.

Before you do that, read the following tax-saving tips from a tax accountant.

Advertising

If you advertise your rental property in magazines, newspapers, websites, and other similar places, go ahead and claim a tax deduction on all payments you have made for it. You spend all advertising expenses because they are all directly related to your property.

Interest

There are many costs you can charge in terms of interest.

At the top of the list is the interest on the mortgage you borrowed to finance the purchase of your rental property. Be sure to list all the costs charged when you get a home loan, such as legal fees, mortgage application, quote, etc. Skip the mortgage capital for the property because it is not deductible.

You can also deduct the funds you have borrowed to finance the improvement of your property. However, these must be subsidized costs, which the CRA defines as the funds you borrow to finance your leased property’s construction, modernization, and renovation to increase its value or make it more suitable for renting.

Professional Fees (including legal and accounting fees)

Compensation due for hiring different professionals to work for you is also deductible. Examples include property management, legal fees (for preparing leases, debt collection, etc.), accounting expenses (for bookkeeping, auditing, budgeting, etc.), and consulting fees. Generally, you can deduct property management and other expenses incurred in connection with the operation of your rental property.

Repairs, Maintenance, and Improvements

Ordinary repairs and maintenance, such as the cost of repairing broken doors or windows, painting, etc., are calculated as ongoing expenses and can therefore be deducted in the year in which they are spent. Repair and maintenance costs can be a significant ongoing expense on your tax return.

Management and Administration Expenses

This category includes the amounts you have paid to companies or individuals to manage your Toronto rental property. Other payments that fall into this category include what you have paid or have to pay to real estate agents to find new tenants or collect rents.

Whether you hire a property management company to manage your property or an accountant who will work to organize your property’s rental books, these property management fees are all deductible expenses.

Costs for Motor Vehicles

The cost of motor vehicles is deducted based on the amount of property you own. For example, if you own a rental property, you can deduct specific motor vehicle expenses, but only if certain conditions are met.

Insurance

Is your rental property insured? Have you paid home insurance premiums to cover your rental property? If your answer to both questions is yes, you can deduct how much you spent on building or home insurance during the year. However, it is necessary to limit the deduction to cover expenses incurred during the current year. If your premiums offer coverage for more than one year, you can only reduce your expenses in the current year for which they offer coverage.

Office Expenses

As the name suggests, office expenses include the cost of purchasing items such as pens, paper, pencils, stamps, stationery, and the like. These charges can only be claimed if the purchases were made solely for commercial purposes. Items purchased for personal use are personal expenses and cannot be deducted.

Property Tax

Your province will determine how much you will pay in taxes, and then your municipality will collect this amount. Tax rules allow for the deduction of real estate taxes charged by the municipality in the current financial year. Remember to claim only the part directly related to your leased property. For example, if you have a main residence plus a basement apartment that you rent, you can request a percentage of the amount that corresponds to the surface area occupied by the rental unit.

Conclusion

When making a note of these deductible rental property expenses, it would also be nice to look into your income and expenses, which the agency says you cannot deduct from your rental property income. Specifically, this list includes:

  • Penalty
  • Land transfer tax
  • The value of your work… and more!

Filing Taxes concisely deals with several complex issues; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Our experienced and professional team at Filing Taxes is here to set you on the right path considering your personal business situation. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.

Frequently Asked Questions

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Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.

Written By:
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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