RE Investor Expenses
- Thread starter wader
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I think he was just saying it's very important that you get an accountant to advise you on these areas before you make any 'assumptions' that could affect your tax situation.
But at the same time, if you are doing property management, then the best thing would be to start up a company and pay that company (which is you) the fee. Eventually, this will go to a third party company anyway. As for the amount, yes, it has to be in line with what the market bears or you will set off another red flag.
Vehicle expenses need to be tracked diligently - with a proper log and is charged according to your province I believe (I'm no accountant and it's why I have one)
Other expenses are office space in the home, home office utilities ( a portion ), on-going education etc. Navav and George are two great accountants you can seek out for advice on how to set up your real estate business.
Does that help you out a bit better?
But at the same time, if you are doing property management, then the best thing would be to start up a company and pay that company (which is you) the fee. Eventually, this will go to a third party company anyway. As for the amount, yes, it has to be in line with what the market bears or you will set off another red flag.
Vehicle expenses need to be tracked diligently - with a proper log and is charged according to your province I believe (I'm no accountant and it's why I have one)
Other expenses are office space in the home, home office utilities ( a portion ), on-going education etc. Navav and George are two great accountants you can seek out for advice on how to set up your real estate business.
Does that help you out a bit better?
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[quote user=wader]Property Management - how much...10%? I do it myself so do I just claim that personally as an income?
The way you've worded this question is the reason you got the "get an accountant" advice, which is good advice nonetheless. What benefit do you see coming from doing that? If you claimed an expense against your rental income, and then paid it to yourself as self-employment income, what would you be hoping to achieve? You would get the "benefit" of being able to pay EI/CPP (if you're not already past the threshholds) at ~double the rate, since you'd have to pay the employer portion as well.
[quote user=JoeRagona]But at the same time, if you are doing property management, then the best thing would be to start up a company and pay that company (which is you) the fee. Eventually, this will go to a third party company anyway. As for the amount, yes, it has to be in line with what the market bears or you will set off another red flag.
You could certainly do this, but it depends on the size of your operation. If you have two rental properties, is it worth setting up a corporation (the reason this is silly as a sole prop is above) to run a management company and paying for the professional services required to do so? Maybe if you're planning on eventually becoming a property manager.
Ultimately, there isn't enough information in your OP to give you much cogent advice other than to get an accountant, so it probably doesn't make sense to lash out at someone who was just trying to help. Why not take it in the spirit it was offered? (IE someone who's not getting paid taking time out of their day to try to help you)
Regards,
Michael
The way you've worded this question is the reason you got the "get an accountant" advice, which is good advice nonetheless. What benefit do you see coming from doing that? If you claimed an expense against your rental income, and then paid it to yourself as self-employment income, what would you be hoping to achieve? You would get the "benefit" of being able to pay EI/CPP (if you're not already past the threshholds) at ~double the rate, since you'd have to pay the employer portion as well.
[quote user=JoeRagona]But at the same time, if you are doing property management, then the best thing would be to start up a company and pay that company (which is you) the fee. Eventually, this will go to a third party company anyway. As for the amount, yes, it has to be in line with what the market bears or you will set off another red flag.
You could certainly do this, but it depends on the size of your operation. If you have two rental properties, is it worth setting up a corporation (the reason this is silly as a sole prop is above) to run a management company and paying for the professional services required to do so? Maybe if you're planning on eventually becoming a property manager.
Ultimately, there isn't enough information in your OP to give you much cogent advice other than to get an accountant, so it probably doesn't make sense to lash out at someone who was just trying to help. Why not take it in the spirit it was offered? (IE someone who's not getting paid taking time out of their day to try to help you)
Regards,
Michael
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I'm going to start out by saying that I'm not 100% sure on this one (since it doesn't apply to me, haven't worried about it), but pretty sure, as it does make sense when compared to other equivilent tax law:
In regards to the vehicle, it depends on how many properties you have. If you only have 1, you can not claim vehicle costs (since the drive to/from 'work' is considered personal, and the rental would be your 'work' location). However, if you do have more than 1, then you can start considering vehicle expenses.
In regards to the vehicle, it depends on how many properties you have. If you only have 1, you can not claim vehicle costs (since the drive to/from 'work' is considered personal, and the rental would be your 'work' location). However, if you do have more than 1, then you can start considering vehicle expenses.
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Fair enough
I have a duplex, fourplex, a two unit house, and my primary residence. I have a 50/50 split in all the units except my primary residence. They are all positive cash flow and I want to make sure that I am expensing everything that I can. I take care of the property management and some minor maintenance.
I recently changed accountants for my business (not related to real estate). Lets just say our old accountant was not doing his job properly. Since I got burned from our old accountant, I want to make sure that my new accountant is....looking out for me in every way. My business is number one and my investing is number two, I don't have the luxury of searching for another accountant at this time as I don't need the government asking why three accountants in just over a year.
Maybe I wasn't clear on my original question, but I'm simply wondering what are some of the things you guys are writing off and what degree. Joe touched on it with on-going education...thanks Joe, it gives me something to think about. I know that my accountant missed that one.
Michael, I'm not sure why you need more info for my OP question, butt hopefully the above helps. For some reason you got fixed on property management, maybe it will work and maybe not. My partner moved to Calgary and we both feel that I should be compensated for doing the management or else let someone else do it. I'm looking for creative (legal) ways for expenses.
Sorry Nik, I shouldn't have posted that. It's an issue I have....not you.
Wade
I have a duplex, fourplex, a two unit house, and my primary residence. I have a 50/50 split in all the units except my primary residence. They are all positive cash flow and I want to make sure that I am expensing everything that I can. I take care of the property management and some minor maintenance.
I recently changed accountants for my business (not related to real estate). Lets just say our old accountant was not doing his job properly. Since I got burned from our old accountant, I want to make sure that my new accountant is....looking out for me in every way. My business is number one and my investing is number two, I don't have the luxury of searching for another accountant at this time as I don't need the government asking why three accountants in just over a year.
Maybe I wasn't clear on my original question, but I'm simply wondering what are some of the things you guys are writing off and what degree. Joe touched on it with on-going education...thanks Joe, it gives me something to think about. I know that my accountant missed that one.
Michael, I'm not sure why you need more info for my OP question, butt hopefully the above helps. For some reason you got fixed on property management, maybe it will work and maybe not. My partner moved to Calgary and we both feel that I should be compensated for doing the management or else let someone else do it. I'm looking for creative (legal) ways for expenses.
Sorry Nik, I shouldn't have posted that. It's an issue I have....not you.
Wade
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My comments about the property management were towards the topic, not yourself necessarily. Joe mentioned a strategy that falls more towards the "advanced" end of the spectrum, and its not for everyone, since the expenses can outweigh any potential tax savings. That's why I was inquiring as to your portfolio, because it makes a difference in that situation.
As to your original question, you can also claim professional fees (legal/accounting), CMHC prorated over 5 years, CCA as a percentage of the capital value of buildings/fixtures, any maintenance and advertisements for filling a vacancy.
Regards,
Michael
As to your original question, you can also claim professional fees (legal/accounting), CMHC prorated over 5 years, CCA as a percentage of the capital value of buildings/fixtures, any maintenance and advertisements for filling a vacancy.
Regards,
Michael
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[quote user=wader]Vehicle - how much?
Property Management - how much.
all that is ACTUAL and REASONABLE !
certainly all property related interest, management fees, paint jobs etc. ..
Other examples: 100% of one trip to the property .. and 25% another trip also combined with visiting granny.
perhaps 25% of your home office if portfolio is small .. 100% if large .. etc.
Make it audit proof .. i.e. if the CRA rep shows up will your expense be reasonable and actual ?
Property Management - how much.
all that is ACTUAL and REASONABLE !
certainly all property related interest, management fees, paint jobs etc. ..
Other examples: 100% of one trip to the property .. and 25% another trip also combined with visiting granny.
perhaps 25% of your home office if portfolio is small .. 100% if large .. etc.
Make it audit proof .. i.e. if the CRA rep shows up will your expense be reasonable and actual ?
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Not a problem, Wade. Basically what I'm saying is you need to have a good team to take care of the things so that you don't have to. A good accountant with real estate experience would be a valuable member of a team. They will know what CRA allows etc. and when they file your taxes and their name is on there, if it's their mistake, they will take responsibility. It's important to know yourself something about tax law obviously, but I rely on a professional for the advice on what I can claim etc and for the filing with CRA.
Nik
Nik
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[quote user=RCC]closed in Mar but did not rent out until Sept. do you deduct mortgage interest, utilities, taxes, CCA etc. starting from March or only from Sept onward.
fromt the start, of course !
Plus reasonable and actual travel costs (to bank, property, realtor meetings, ..) , marketing expenses, meals, inspection reports, .. ANYTHING REASONABLE AND ACTUAL (and verifiable)
fromt the start, of course !
Plus reasonable and actual travel costs (to bank, property, realtor meetings, ..) , marketing expenses, meals, inspection reports, .. ANYTHING REASONABLE AND ACTUAL (and verifiable)
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It is my understanding that although you can claim everything from day 1, be wary of renovations. If you buy a place and do renovations to make it rent-able, it may be considered a capital cost not a regular expense. If the unit is rented or has a history of being rent-able (by you?) in its original state it is likely to be considered an expense for the same renovations.
Mike
Mike
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Good evening Wade,
I like taking a slightly different approach to the question of what is deductible. Our checklists for example can help identify some areas where a taxpayer may be neglecting opportunities. However, as everyone is slightly different, and particularly where you also have non-real estate oriented activities, I think that the question should more so be phrased as first, "what do I spend money on during the year?" and then secondly, "are these costs deductible". Sitting down with your tax advisor for an hour will largely sort this out if you've done a little homework as to what you spend your money on. Often there is a business portion of the expense as Thomas was getting at with the trips. In other cases you can be surprised as to what is deductible, or would be deductible with a little tweaking.
While you're right that you don't want to be regularly switching accountants from your perspective or the CRA's, you also want to ensure that you're working with a great one or you're even worse off.
I like taking a slightly different approach to the question of what is deductible. Our checklists for example can help identify some areas where a taxpayer may be neglecting opportunities. However, as everyone is slightly different, and particularly where you also have non-real estate oriented activities, I think that the question should more so be phrased as first, "what do I spend money on during the year?" and then secondly, "are these costs deductible". Sitting down with your tax advisor for an hour will largely sort this out if you've done a little homework as to what you spend your money on. Often there is a business portion of the expense as Thomas was getting at with the trips. In other cases you can be surprised as to what is deductible, or would be deductible with a little tweaking.
While you're right that you don't want to be regularly switching accountants from your perspective or the CRA's, you also want to ensure that you're working with a great one or you're even worse off.
Learning about the tax law as mentioned is always a great way to sharpen your skills. I enjoyed 81 Tax Tips (okay I'm a little strange but you should have seen my refund this year), it answers all of the questions and comments posted here . It also gives some warnings, tips, insights etc.
We never need to worry about learning too much about our business. All part of the extra 10%.
I myself, when considering 'reasonable' always ask "How will I feel explaining my reasoning to a judge WHEN I get audited? Can I prove/support my position" I've read enough tax court rulings to realize there are no hard and fast rules (same judge rules two different ways on what appears to be identical cases).
Again chance favours the well prepared.
Mark
We never need to worry about learning too much about our business. All part of the extra 10%.
I myself, when considering 'reasonable' always ask "How will I feel explaining my reasoning to a judge WHEN I get audited? Can I prove/support my position" I've read enough tax court rulings to realize there are no hard and fast rules (same judge rules two different ways on what appears to be identical cases).
Again chance favours the well prepared.
Mark
Without trying to sound like a complete jerk, which I'm sure I will,
I find it troubling that you say your business and investing are your number 1 and 2, and that you don't have the luxury of searching for another accountant because you don't want the government asking why you have three accountants.
If your business and investing are high priority, finding a qualified professional isn't a luxury, it's a necessity. I'd be more concerned with the government asking you about your deductions that you applied yourself as opposed to why you used three accountants (which I don't see how they would know about anyway unless each accountant is providing information to the government directly on your behalf).
I find it troubling that you say your business and investing are your number 1 and 2, and that you don't have the luxury of searching for another accountant because you don't want the government asking why you have three accountants.
If your business and investing are high priority, finding a qualified professional isn't a luxury, it's a necessity. I'd be more concerned with the government asking you about your deductions that you applied yourself as opposed to why you used three accountants (which I don't see how they would know about anyway unless each accountant is providing information to the government directly on your behalf).