CERTIFIED GENERAL ACCOUNTANT
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 84 Moody Street
Port Moody, BC
V3H 2P5
Phone: 604-469-3733
Toll free:
 1 (877) TWHAWES
1 (877) 894-2937
Fax: 604-469-3760 or
1 (866) 901-7775
Cell: 604-626-2066
Email: itfgrs@terryhawes.com

The first rule of a Professional Accounting Practice ...

"Nobody is in a rush for the wrong answer."

- "Take advantage of every tax vehicle that you can, as long as the vehicle is a good investment in its own right." -

- "Real charity does not care if it is deductible or not." -

- "Be committed to your partners' well-being, and they'll be committed to yours." -

You must report rental income and losses if you own a rental property (in proportion to your ownership). Co-owners cannot change the percentage of their rental income or loss unless the percentage of ownership changes.

What Expenses are Deductible...

Current expenses are deductible from rental income in the year incurred; they include:

• Advertising
• Insurance
• Mortgage interest (not the principal portion) and refinance fees must be amortized over the term of the new mortgage
• Maintenance and repairs (includes strata fees)
• Motor vehicle and travel expenses (limited circumstances)
• Office expenses
• Legal and accounting fees
• Property taxes
• Utilities

What Expenses are Not Deductible...

Capital expenses are considered to be of a lasting nature; you cannot deduct the full amount in the year incurred. These amounts are added to the capital cost of the building and may be deductible over a period of several years; they include:

• The purchase price of the property
• Legal fees connected with the purchase
• Cost of furniture and equipment rented with the property
• Renovation costs to put the rental unit in a condition for rental or resale
• Land transfer taxes

If you rent a portion of the building in which you live, you can claim expenses that pertain to the rental portion of the building.

What Qualifies as a Rental Loss...

When rental expenses exceed rental income, a rental loss is created that may be deductible against other income. However, if rental revenue consistently does not cover expenses, then a reasonable expectation of profit does not exist and rental losses are deemed non-deductible. If you rent your property to a relative  or other 'related' party, and you lose money because you are renting at a lower rate than you would rent to other tenants, you cannot claim the loss.

Other Considerations Special situations may arise that affect the property owner; they include:

• Change in use

• Sale of rental property

• Principal residence designation

• Recapture of capital cost allowance

• Replacement property