Found an interesting article which quotes Manulife`s Kurt Rosentreter attacking real estate with half trues:
Article is filled with conjecture and anecdotal evidence
My favs:
In addition, condo owners should not assume they will be able to sell their unit at a profit. Mr. Rosentreter believes that the “sheer number of new condos being built almost guarantees that in the event of a market correction, the condos will fall faster and deeper” than a townhome or a bricks-and-mortar house.
This is conjecture...the total overall number of units being built in the GTA is down, because of the green belt and places to grow legislation most new developments are going to be condos. According to realnet, the market is currently undersupplied - hence bidding wars in Toronto.
Making a rental income from condos is also getting tougher, since Canada Revenue Agency is cracking down on landlords who repeatedly claim rental losses and deduct them against their regular income to trim their income tax bill, Mr. Rosentreter said. So unless you are putting down a large deposit and getting a small mortgage, a rental condo should not be claimed as a tax loss.
Has anyone had CRA tell them they can`t deduct rental losses?
One interesting thing I ran into today while reading the IMF World Economic Outlook (Oct09) was a comment about Canada needing to centralize securities administration. It`s a major problem and we do need some reform and some enforceable laws....a Canadian SEC equivalent. I won`t be surprised if it starts to reach into real estate investment, creating some of the problems we encounter in Ontario and BC.
I think the article raises some valid points .. as not all condos make a good investment, they can go down and some have high condo fees.
But then it is like a real estate expert saying "the stock market is bad" because prices of stocks can go down, and some public firms run with unethical managements.
The article is biased .. but it is an opinion piece ..
QUOTE (BrianPersaud @ Nov 2 2009, 10:27 AM) Making a rental income from condos is also getting tougher, since Canada Revenue Agency is cracking down on landlords who repeatedly claim rental losses and deduct them against their regular income to trim their income tax bill, Mr. Rosentreter said. So unless you are putting down a large deposit and getting a small mortgage, a rental condo should not be claimed as a tax loss.
Has anyone had CRA tell them they can`t deduct rental losses?
This can happen. The Tax Act states that you must have a `reasonable expectation of profits` in order to deduct losses - in any investment. So if after some years have passed and you have not made profits, then CRA can indeed dis-allow those losses.
QUOTE (GarthChapman @ Nov 2 2009, 11:29 PM) This can happen. The Tax Act states that you must have a `reasonable expectation of profits` in order to deduct losses -
This begs the question: Do we then not deduct all allowable expenses to not trigger an audit??
Of course not, I deduct as much as I can, right now my income is low and I`m struggling with a vacancy so there will no doubt be large deductions from my taxable income. I`m already giving the feds an interest free loan to slosh around at their disposal, I`ll get back as much as I can.
QUOTE (EdRenkema @ Nov 3 2009, 07:04 AM) This begs the question: Do we then not deduct all allowable expenses to not trigger an audit??
Of course not, I deduct as much as I can, right now my income is low and I`m struggling with a vacancy so there will no doubt be large deductions from my taxable income. I`m already giving the feds an interest free loan to slosh around at their disposal, I`ll get back as much as I can.
My understanding of CRA rules is that you canNOT use a rental loss against regular income !! You can carry it forward to the point when you sell it ..
While I also strongly believe you should arrange your affairs such that taxes are minimized, cheating on your taxes is not recommended ..
QUOTE (ThomasBeyer @ Nov 3 2009, 10:52 AM) , cheating on your taxes is not recommended ..
Please do not infer that I deliberately cheat on my taxes - YOU are totally unaware of my situation and are making an erroneous assumption.
Thats why I use a licensed tax professional who is also a RE investor.
And yes I have been told by a tax professional that a vacancy loss does carry onto personal taxes...
which by the way are already coercively extracted from my employment income at a much larger percentage than is reasonable.
QUOTE (EdRenkema @ Nov 3 2009, 01:28 PM) Please do not infer that I deliberately cheat on my taxes - YOU are totally unaware of my situation and are making an erroneous assumption.
Thats why I use a licensed tax professional who is also a RE investor.
And yes I have been told by a tax professional that a vacancy loss does carry onto personal taxes...
which by the way are already coercively extracted from my employment income at a much larger percentage than is reasonable.
If you are consistently getting a large tax refund every year, you can file to have your employer withhold less tax at source, eliminating the interest free loan to the government. Your accountant should be able to tell you how to do this, its just a form to fill out.
QUOTE (EdRenkema @ Nov 3 2009, 02:28 PM) Please do not infer that I deliberately cheat on my taxes - YOU are totally unaware of my situation and are making an erroneous assumption.
sorry .. I did not mean to implicate you .. I was making more of a general statement !
QUOTE (EdRenkema @ Nov 3 2009, 02:28 PM) Thats why I use a licensed tax professional who is also a RE investor.
And yes I have been told by a tax professional that a vacancy loss does carry onto personal taxes...
please enlighten us here how this is possible .. as I am of the (perhaps mistaken) understanding that a real estate investment cannot create a loss against regular income !!
QUOTE (EdRenkema @ Nov 3 2009, 02:28 PM) which by the way are already coercively extracted from my employment income at a much larger percentage than is reasonable.
I agree .. vote right ..
QUOTE (bizaro86 @ Nov 3 2009, 04:15 PM) If you are consistently getting a large tax refund every year, you can file to have your employer withhold less tax at source, eliminating the interest free loan to the government. Your accountant should be able to tell you how to do this, its just a form to fill out.
Michael
I looked up the form this spring and my eyes glazed over...
My current focus is to create more RE income and less employment income.
QUOTE (ThomasBeyer @ Nov 3 2009, 06:00 PM) please enlighten us here how this is possible .. as I am of the (perhaps mistaken) understanding that a real estate investment cannot create a loss against regular income !!
I agree .. vote right ..
It is my understanding that a business loss can be carried over to employment income. However I am told that the CRA`s definition of a business is the intention of creating a profit and a consistent loss year after year will be disallowed.
That said profit is certainly my intention and if costs are incurred to try to create or increase revenue those costs are legitimate expenses.
For a more detailed explanation please contact Dube and Associates (that`s what they get the big bucks for!)
QUOTE (ThomasBeyer @ Nov 3 2009, 06:00 PM) sorry .. I did not mean to implicate you .. I was making more of a general statement !
please enlighten us here how this is possible .. as I am of the (perhaps mistaken) understanding that a real estate investment cannot create a loss against regular income !!
You absolutely can deduct a rental loss against employment income. You cannot however create or increase a rental loss by claiming CCA when calculating your rental income (loss) for the year.
So if you had high vacancy, and/or large repair costs then, no problem claim as high a loss as legally possible...don`t forget to include your vehicle expenses.
