In this post, we are reviewing expenses that as a landlord you can & cannot claim against your rental income.
These are guidelines from http://cra-arc.gc.ca
Current and Capital Expenses
Difference Between Current and Capital Expenses:
You can deduct any reasonable expenses you incur to earn a rental income . The two basic types of expenses are current expenses and capital expenses.
Current or operating expenses are recurring expenses that provide a short-term benefit. For example, the cost of repairs you make to keep a asset in the same condition as it was when you acquired it. You can deduct current expenses from you gross income in the year you incur them.
Capitals expenses provides a benefit that usually lasts for several years. For example, costs to buy or improve your property are capital expenses. Generally, you cannot deduct the full amount of these expenses in the year your incur them . Instead you can deduct their cost over a period of several years as capital allowance.
Expenses you can claim against your rental income
You can usually deduct amounts for advertising that your property is available for rent.
You can deduct the premium for insurance coverage on your rental property for the current year. If you policy gives coverage for more than on year, you can only deduct the premiums that relate to the current year.
Deduct the remaining in the year or years that they relate
Legal, Accounting or other professional fees‘
You can deduct legal fees for preparing leases, or collect overdue rents
If you incur legal fees to buty your rental property you cannot deduct them from your gross rental income. Instead allocate the fees between land and building and add them to the respective cost
You can also deduct amounts paid for bookkeeping, audits of your books and records, and preparing financial statements. You may be able to deduct fees and expenses for advice to help prepare your income tax and any related information returns. You can deduct these fees if you needed the help because of your rental operation.
Maintenance & Repairs:
If you pay for repairs to your property, you can deduct the cost of labour and materials, however you cannot deduct the value of your own labour.
Management and Administration fees’
You can deduct the amounts paid to a person or company to manage your property.
You can also deduct amounts paid or payable to agents for collecting rents or finding new tenants.
You can deduct the cost of office expenses, These include small items, such as pens and pencils, paperclips, stationary and stamps
You can deduct property taxes by a province or territory and a Canadian municipality that relate to your rental property for the period that it was available for rent.
You might travel to collect rents supervise repairs, and manage your properties, to claim the expenses you incur, you need to meet the same requirements as motor vehicle expenses.
Travel expenses included the cost of getting to your rental property. Traveling expenses to not include board and lodging which the CRA considers personal expenses.
You can deduct expenses for utilities such as gas, oil, electricity, and cable, if your rental agreement specifies that you pay for the utilities.
If you earn rental income from a condominium unit, you can deduct the expenses that you would usually deduct from rental income. You can also deduct condominium fees’ representing your share of the up-keep, repairs, maintenance and other current of the common property.
Expenses you cannot deduct from your rental income
Land Transfer taxes
You cannot deduct land transfer taxes you paid when you bought your property. Add these amounts to the cost of your property
You cannot deduct the repayments of the principle on your mortgage or loan on your rental property
You cannot deduct any penalties shown on your notice of assessment or reassessment
Value of your own labour
You cannot deduct the value of your own labour or services
Personal Portion of expenses
There are some exception to this rule, make sure check cra-arc.gc.ca or speak to your accountant
For more information visit the the Canada Revenue Agency website at: http://www.cra-arc.gc.ca
Fortune Property Management Group
White Glove Property Management Services
Gordon Duncan 647-286-5773
Rinku Dasgupta 416-938-1238