Owning an investment property can involve several processes and factors that can make the whole thing so confusing. From choosing the perfect property for your investment purchase to making sure your taxes are filed correctly, owning a rental property can be a far from simple process.
It doesn’t all have to be difficult, though. When you do find yourself ready to take the leap into investment properties and rental properties, asking a professional for support can help you ensure that your investment is a profitable one.
With a trained real estate professional by your side to navigate the confusing parts, you can be up and running with your new investment property in no time. Once you’ve chosen the perfect property and made an offer, you’ll want to start making note of all the things you need to track to make claiming expenses at tax time so much easier on both yourself and your accountant.
Rental Expenses you can Claim
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There are many rental expenses that you can (and should!) be claiming on your taxes that can help lower your taxable income, and help create a profitable investment experience for you. Here’s a few expenses that you should always track, and talk to your accountant about whether you can include them in your taxes each year.
Homeowner’s insurance
Because this is a required part of maintaining a rental property, this is an amount that can be deducted from your taxes each year. This only applies if the unit is a rental property. If you’d like to apply this deduction to a home that you live in, you have to figure out how many square feet of your home is used as a rental property.
Maintenance fees
Things like fixing toilets, repairing lights, painting rooms and anything else required in the regular maintenance of the unit can be claimed on your taxes.
Advertising costs
Any costs involved with advertising that you put out to get your unit rented can be deducted from your taxes.
Mortgage interest
Only available as a deduction if your unit is used as rental property, and not on the claim for your personal home, this deduction might take some of the pressure of tax season off.
Utility costs
If you have to pay any part of the utility fees, like when the unit is empty and waiting for renters, you can include this on your taxes.
Property taxes
Another required part of owning a rental property, this deduction can again only be applied to the portion of the unit that you are renting out.
Property management fees
If your rental property is such that you have to hire staff or a property management company to take care of your rental investment property then that expense can also be claimed as a deduction on your taxes.
Capital cost allowance (CCA)
This piece of the claim process can be a big help on your tax returns. The capital cost allowance allows for the depreciation of a home, business equipment and vehicles to be included in your tax return. With rental properties this means that you can write off the purchase price of the property, any legal fees associated with the buying process and the cost of any furniture or equipment that is used in the process of renting the unit.
One thing to be aware of though is that when it comes time to sell your property it’s possible that this allowed amount might have to be incorporated into your taxable income if the sale amount exceeds the undepreciated capital cost that is left.
Filing taxes for your rental investment need not be difficult
Filing taxes in Canada can be a fairly confusing process. Between regular allowable deductions and ones that are only allowed on rental properties, it can be hard to figure out everything that you qualify for. And since your mission, naturally, is to create the most profit and to maximize your deduction allowance, it’s often recommended to hire someone to help you out.
A tax account or a real estate property specialist is often a very good investment that often benefits your profit potential quite a bit. It’s natural to not realize or understand everything that you can claim as a deduction on your taxes, so getting the help from a professional is a wise choice.
