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-----My question is: Canadian-specific
QUESTION: My Husband and I own a townhouse that we rent out and a house where we rent out the upstairs and live in the downstairs. I work only part time and earn less than $10,000 per annum, my husband makes considerably more. I put the majority of the money into the townhouse and equity from the townhouse was used to purchase the house.
I have read that the rental income should be declared in each persons return in proportion to the amount of money that each person put into the property. This would be an advantage to us since my income is so low. However I have also been told that it makes no difference since we are taxed based on our combined income not our individual incomes. Which is true?
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david ingram replies:
A married or common-law couple is supposed to report rental income based upon the respective inputs to the property. Section 74.1 of the Canadian Income Tax Act states this quite clearly.
In Canada, we are taxed on our individual incomes. The US has the option of a joint tax return and in community property states like Washington State, we have to split the income between the spouses if they wish to file as "married filing separately".
Whoever told you that we are taxed on our combined incomes in Canada is completely wrong.
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