Tax season is a busy and complicated time for everyone. Filing taxes can be a scary process since the repercussion of making a mistake can be very expensive.
Investing in rental properties can be both exciting and daunting. However, when it comes to tax season, being a condo owner is very beneficial.
There are many tax dedications that condo owners could be eligible to claim. You just need to know where to look.
In fact, many condo owners are paying little attention to the credit that they can claim. In the long run, these tax breaks could save you thousands of hard-earned dollars.
With the 2017 tax return deadline looming now is an excellent time to review tax tips that can help you claim more deductions.
As a condo owner who rents out their unit, you need to pay attention to the T776 tax form to report rental income and claim the allowable expenses.
Types of expenses you can claim
When you own and rent out a condo you can deduct any reasonable expenses you incur to earn rental income. There are two basic types of expenses that you can claim. These are current expenses and capital expenses.
Current or operating expenses are recurring expenses that provide a short-term benefit. For example, the cost of repairs you make to keep your condo in the same condition it was when you bought it. You can deduct current expenses for your gross income in the year that you incur them.
Capital expenses are those that provide benefits that last for several years. Usually, you cannot deduct the full amount of these expenses in the year you incur them. You will have to deduct their cost over a period of several years as capital cost allowance (CCA).
Capital expenses that you can claim as a condo owner include:
- The purchase price of rental property
- Legal fees and other costs connected with buying the property; and
- The cost of furniture and equipment you are renting with the property.
Rental expenses you can deduct
There are many current and capital expenses that you can claim to save you money.
- You can deduct the amount you spend on promoting your vacant property.
- You can deduct the premiums for insurance coverage on your rental property for the current year.
- Legal, accounting, and other professional fees
- You can deduct the expenses that you spent to acquire legal services to prepare leases or collect overdue rents.
- Maintenance and repairs
- You can deduct the cost of labour and materials for necessary repairs for your unit.
- Management and administration fees
- You can deduct the amounts paid to a professional property management service that takes care of your rental property.
- Office expenses
- You can deduct the cost of all office expenses - even the small ones such as pens, pencils, and paper clips.
- Property taxes
- You can deduct property tax assessed by a province or territory and by a Canadian municipality that relates to your rental property for the period that it was available for rent.
You can even deduct the amounts paid for bookkeeping services, audits of your books and records, and preparing financial statements.
There are many more deductions that you might be eligible for. Visit the Government of Canada website for specific information on tax deductions.
The 2017 income tax deadline is just around the corner. Make sure to go over all of your expenses for your rental unit and see where you can claim deductions.