Landlord Guide: 2022 Rental Property Tax Deductions In Canada
It’s tax time once again, and if you’re a landlord, you might have a lot on your plate for the 2021 tax year. But don’t worry — to help clear up tax confusion, liv.rent was joined by Meghan Chomut, an Investment Property Advisor and CFP® for a live liv.talk webinar that’s essentially a Canadian landlord’s how-to guide to property tax deductions. This post is a partial transition of that webinar, and we’ll be going over basic tax principles, COVID-19’s effect on your taxes, and some brand new tips to help you get a better return for the 2021 tax year.
Table of Contents
Download The Landlord’s Guide To Property Tax Deductions
The ultimate tax guide for landlords in Canada. Everything you need to know about taxes, tax in the time of COVID-19, and how to get a bigger return.
Introduction: Rental property tax deductions in Canada
Note: This video was recorded for the 2020 tax year, but the content is still applicable for the upcoming 2021 tax filing. Additionally, we’ve updated the following transcription with any information or changes that landlords should be aware of.
This article is a partial transcription from our liv.talk live webinar: Landlord’s Guide To Property Tax Deductions. Watch the video above and download the guide now to hear all of our insights that landlords and investors need to know to be ready for the 2021 tax year.
Each landlord has a unique tax position and at the end of the day, it’s your responsibility to follow the rules set out by the Canada Revenue Agency (CRA) and we encourage landlords to keep up with the CRA for the latest news and updates.
Meet our webinar leaders: liv.rent’s Marketing Specialist Melany Roa was joined by Meghan Chomut, Investment Property Advisor and CFP®:
Tax 101: basic tax principles for landlords
When it comes to filing taxes, you have to get the basics down first. This section of the webinar is like a tax 101 class for landlords. We cover:
- An overview of filing taxes as a landlord
- Rental income vs. business income
- Share of ownership
1. Filing taxes as a landlord
Meghan covers the tax implications of being a landlord, plus a general overview of what you need to know and look out for.
2. Rental income vs. business income
It’s important to know whether the money you’re getting from your property can be classified as rental income or business income.
- rental income is when you provide housing
- business income is when you provide not just housing, but also other services
3. Share of ownership
In Canada, share of ownership is when you don’t fully own a rental property individually. Most typically, it would be split 50/50 between spouses or family members, for example.
Or, if you own it 100% on your own, then you would claim all the income as your own.
Tax in the time of COVID-19
Though landlords had last year to get familiar with COVID-19 tax rules and regulations, it’s good to refresh yourself on what’s different. The webinar covers everything landlords need to know about the effect of COVID-19 on their tax returns, including:
- Tax implications of CERB, CRB, and EI
- Non-payment of rent & Canada Emergency Rent Subsidy
- Work from home expenses
1. Tax implications of CERB, CRB, and EI
Meghan covered what the COVID-19 financial relief programs mean for your taxes, but here’s a brief overview:
- Canada Emergency Response Benefit (CERB)
- Canada Recovery Benefit (CRB)
- Employment Insurance Benefits (EI)
All of these payments people received are subject to regular income tax. Some of them had a portion of tax withheld, but some did not.
For example, at first, CERB payments were not taxed, although it is a taxable benefit. The CRB, on the other hand, had a 10% tax deduction. You may be in an owing position this year if you are in a higher than 10% tax bracket.
Be sure to watch our webinar to find out more, but in the meantime, you can see liv.rent’s resources for both landlords and renters about COVID-19 programs:
- Immigrating to Canada during the COVID-19 Pandemic
- Coronavirus (COVID-19) Canada – Resources for Landlords and Tenants
- Coronavirus (COVID-19) Canada – Update For Landlords and Tenants
- Coronavirus (COVID-19) Rent Relief Canada
- Coronavirus (COVID-19) Canada – Support For Landlords
2. Non-payment of rent & Canada Emergency Rent Subsidy
COVID-19 had immediate and severe financial implications for individuals and families. There were a lot of people who suddenly were not able to afford to pay rent.
If landlords did not receive rent in 2020 as a result of COVID-19, then they have some options. For example, they can claim paralegal fees and operational expenses to get a better return. Though any amount that was owed and not paid in 2020 wasn’t taxable, this money should have been repaid by July 2021, so it’s eligible for taxation this tax season.
There were also landlords who received money from the Canada Emergency Rent Subsidy, and Meghan will be talking about how you can claim this on your income taxes in our upcoming webinar.
3. Work from home expenses
Landlords will want to take advantage of the home office expense this year, especially if they joined in the remote working from home culture that was created as a result of the pandemic.
The home office expense is available to anyone who worked from home for at least half of the time over a consecutive period of four weeks or more because of the pandemic.
There are two versions of processes: a new simplified one and a traditional, more detailed process.
1. Simplified process
As part of the new simplified process, people can claim up to $2 per day up to a maximum of $400. This would cover a range of expenses you had because you were stuck working at home.
2. Traditional detailed process
Landlords will want to try to go for this more traditional detailed process because it can add up to more than $400 in tax relief. To file with this process, you will need a T2200 from your employer, plus you’ll want to figure out the square footage of both your home and your office. Things that can be covered by this process include:
|Some bills & utilities||Maintenance||Office supplies||Cell phone (for employment use)|
|– minor repairs|
– cleaning supplies
– light bulbs
|– stationery items|
– sticky notes
– ink cartridges
|– basic cell service plan for work use|
– any long-distance calls for work
Tax hacks to get a bigger return
At the end of the day, everyone, including landlords, want to make sure they’re getting the best return possible.
There are five key areas where you can help yourself to maximize your return:
- Claimable expenses
- Mortgage payments
- Common expenses that people tend to overlook or forget
- Current expenses vs. capital expenses
- Claiming a loss
- Bookkeeping and tax tips
1. Claimable expenses
There are many expenses that landlords and property owners incur that they will want to claim for a better return. This can include things like insurance and interest costs. Additionally, some repairs or routine maintenance you do on your property can be claimable.
Plus, if you obtain professional services, that can also be a claimable expense. Finally, keep those receipts for any trips to Staples because you can also claim office supplies.
2. Mortgage payments
You cannot deduct your mortgage payment.
However, you are eligible to claim any interest that you incurred on money that was borrowed to maintain the investment. Any interest on your mortgage, line of credit, or any other loan for your investment property can be claimed.
3. Common expenses that landlords overlook
Meghan shared some hidden expenses that people often forget to claim even though they’re eligible for them. This will include things like:
- Professional services
- Office supplies
- Repairs and maintenance
Additionally, from the perspective of investment analysis and financial planning, the most common costs that investors forget to include when they are looking at properties as income properties are:
- Property management
- Capital expenditures
4. Current expenses vs. capital expenses
Meghan covered the difference between current and capital expenses. Here’s a brief overview of what was covered:
Essentially, current expenses are anything that keeps your property reasonably maintained. Your everyday stuff.
However, capital costs, are expenses that go beyond that. They actually add considerable value to your property. This includes things like repairs that extend the useful life of your property, improve it beyond its original condition, or any repairs made in advance of selling a property or as a condition of a sale.
5. Claiming a loss
So, how can you claim a loss if your rental expenses were more than your rental income? Meghan covers that in our webinar.
6. Bookkeeping and tax tips
Bookkeeping is one area where people can help themselves greatly to make tax season go more smoothly, saving them time and energy.
Meghan recommends when it comes to bookkeeping that you stick with one method: either digital or paper. Trying to do both will cause confusion.
She also recommends getting an email address for each of your properties, marking one day a month in your calendar as a bookkeeping catch-up day, and anywhere you can automate processes like income and expenses.
We made organized solutions for every step of the rental process.
For example, instead of checking emails, texts, and voicemails — you can keep all communication between you and tenants in the app. Our chat timeline feature is also where you send contracts to sign as well so it’s all there for you securely stored you don’t have to print, file, and chase down lost emails.
So you can use liv.rent like just to list your properties if you want, but you can also bring your entire rental process on board just like Meghan’s “one-method” for bookkeeping because it makes things much easier.
About Meghan Chomut
Meghan Chomut is a Canadian Investment Property Advisor and CFP®. She helps families get ahead — one smart financial decision at a time. She also creates custom, one-page financial roadmaps to help you find the next steps.
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