Tax time.

[Bottlejack]

Tax time is going to be painfull this year.. I was wondering if anyone has some advise on right off`s .
Should I depreciate my properties? I have three that are going to be long term holds, maybe four. Two that I would like to sell in the near future (with in 5 years). I maxed out my rrsp; I know the basic right offs, interest, taxes, maintenance.

I also sold a property, the original plan was to buy it fix it up live in it... that didn’t happen. I bought it and decided that I did not want to work on it all summer so I relisted it and sold it. So I have a gain of around 35K to pay as well. Not sure if it is a capital gain or straight income.

Another quick question how come I never see an income tax expense in everyone’s calculations to see if a property cash flows? That seems to be the biggest expense next to the mortgage. Paying just over 41% on every dollar that I can’t right off is going to hurt... I know everyone pays taxes. But I have heard the $100 cash flow per door statement a few times. That does not leave much after the taxes are paid on the principal that was paid down on 25 year mortgage. Should I have my properties mortgaged higher?

Any suggestions?



Thanks Eric

 

[Dan_Eisenhauer]

Eric, I have always been taught to build income tax into my calculations, and to use the maximum marginal rate in the province the person was living. So, I am one who understands your concern.

When I raised that question with the REMA developers, they responded, and I tend to agree with the answer, that income is such an individual situation that the only way to have everyone fit the least common denominator is to ignore tax effects.

 

[Thomas Beyer]

taxes are reasons for celebration as you made a profit ! Congratulations !

yes, depreciate a property up to 4% annually, to get taxable income to 0.

Do some income splitting to reduce taxes i.e. hire your wife/kids/grandma for some actual tasks performed and pay them reasonably well if they have a lower, possibly 0, tax bracket !

 

[Conrad5]

QUOTE (thomasbeyer2000 @ Jan 23 2009, 05:12 PM) taxes are reasons for celebration as you made a profit ! Congratulations !

yes, depreciate a property up to 4% annually, to get taxable income to 0.

Do some income splitting to reduce taxes i.e. hire your wife/kids/grandma for some actual tasks performed and pay them reasonably well if they have a lower, possibly 0, tax bracket !

Hi Thomas,
Does the depreciation offset the income from the property only or it covers other personal incomes.
Thanks.
Conrad.

 

[Thomas Beyer]

QUOTE (caglah @ Jan 24 2009, 02:52 AM) Does the depreciation offset the income from the property only or it covers other personal incomes.you can use depreciation only to offset property income to 0, not to create a loss to deduct against non-rental income !

 

[Conrad5]

QUOTE (thomasbeyer2000 @ Jan 25 2009, 09:14 AM) you can use depreciation only to offset property income to 0, not to create a loss to deduct against non-rental income !


Thanks Thomas.