the tax man

[Stephen1151]

I just did my taxes and I owed about $900 dollars...apparently my rental properties are making to much money even though im breaking even on them. Does anyone know some good tax strategies so I can plan for a tax return next year?

Is it possible to have my wife start a company that does fix it jobs on our properties and then employ me to do the work??? just thinking out loud but any comments or ideas are appreciated.

 

[dplummer]

Spend the money with a good Accountant. They will find you all the legal ways to save you $$$ & keep your a$$ out of jail. I have no problem sleeping & the tax man can check what he likes. Just my 2 cents. Doug

 

[bizaro86]

QUOTE (stephen @ May 5 2010, 09:59 PM) Is it possible to have my wife start a company that does fix it jobs on our properties and then employ me to do the work??? just thinking out loud but any comments or ideas are appreciated.

How would this help you? For every dollar deducted from your real estate business, you`d have a dollar of employment income from the "fix-it" business. And it would be employment income, so if you`re not over the maximum, you`d have to make CPP contributions on the employment income.

If you`re not claiming CCA on your taxes, you could do so and save the money that way, although you`ll probably have to pay the tax when you sell.

I`m not an accountant, and none of this is professional advice to you or anyone else. If you require professional advice, I recommend you hire a qualified accountant.

Michael

 

[TodorYordanov]

George Dube is my accountant. I didn`t even attempt to do it myself. I am quite happy with my tax return. But most important is that I know it is done right.

 

[Thomas Beyer]

claim some CCA (aka capital cost allowance aka depreciation, up to 4% of property value annually excl. land value)

 

[Stephen1151]

QUOTE (ThomasBeyer @ May 6 2010, 05:49 PM) claim some CCA (aka capital cost allowance aka depreciation, up to 4% of property value annually excl. land value)




Hi and Thanks for everyones imput. I dont know if my accountant has been depreciating my properties every year in fact I didnt know this was possible. Does any one know of a good accountant or tax stratagist in the Richmond/Vancouver area that understands this practice?
Thanks. Stephen

 

[jeffjas]

QUOTE (stephen @ May 7 2010, 01:48 PM) Hi and Thanks for everyones imput. I dont know if my accountant has been depreciating my properties every year in fact I didnt know this was possible. Does any one know of a good accountant or tax stratagist in the Richmond/Vancouver area that understands this practice?
Thanks. Stephen

Are you sure you deducted everything that you possibly could ? Did you have vehicle expenses ?
Although there is a benefit to claiming depreciation on the property you have, there is the negative consequence of recapture when you sell in the future. Its a case of save now and pay more later after you sell.

 

[Cargren]

Murji & Associates (Navaz Murji, CGA) (REIN Member) - 604-415-0808 - www.realaccountant.com - Burnaby
Has presented at the REIN workshops, works with REIN Members across the country.

 

[Mecheng]

QUOTE (jeffjas @ May 7 2010, 05:22 PM) Although there is a benefit to claiming depreciation on the property you have, there is the negative consequence of recapture when you sell in the future. Its a case of save now and pay more later after you sell.
Intresting point about claiming CCA.
Is this a case of "save" now and "pay more" later or is it "pay" now or "pay" later?
Of course you have to pay back CCA if you sell for a profit in the future, but do you pay more?
Do you just not return the amount you have previously claimed or does it get claimed in a different way?

 

[jeffjas]

QUOTE (Mecheng @ May 10 2010, 07:59 PM) Intresting point about claiming CCA.
Is this a case of "save" now and "pay more" later or is it "pay" now or "pay" later?
Of course you have to pay back CCA if you sell for a profit in the future, but do you pay more?
Do you just not return the amount you have previously claimed or does it get claimed in a different way?

If CCA could be used to create a rental loss I would say that it`s a good tool to use. But it is not and there`s good reason why the gov`t doesn`t allow CCA to create or increase a rental loss.

Its up for debate but I think the consensus is that you will generally end up paying more tax on recapture then you would save by claiming CCA on property. By taking CCA every year the gov`t lets you deduct 3% or 4% every year. So you might reduce your income to $0 every year and pay no extra tax maybe get a bit of a refund .

Say 5 years go by and you claimed a total of 50K in CCA, you then go to sell the property, you would then have to add back that entire amount in a single year - that`s straight income ! Then on top of that a capital gain (hopefully). You`d likely be in the highest tax bracket paying the highest tax rate.

Your cheque at closing might be nice but your tax return wouldn`t look so good.

I think you should find every little expense that you possibly can before turning to CCA.

 

[Stephen1151]

thanks for all the imput...and also for the tax stratigest reccomendation.