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Read below for the question.
The official rule would be that if you are buying this condo for
your mother to live in rent free in the future, no expenses would
be deductible against other income.
All sorts of tax cases point this out.
People do not realize that unless you buy the condo to make a
rental profit, "nothing" is deductible against other income.
You should read my November 2001 newsletter at www.centa.com and
the chapter on rentals at www.centa.com (click on Tax Guide) and
the chapter on expectation of profit at the same place.
hope this helps - david
Hi David,
I have a few questions I am hoping you can answer:
1. My husband and I are in the process of buying a condo to rent
out and I
was wondering how long the taxman will let us right off the
interest, condo
fees etc. before a profit needs to be made? The condo is going
to cost
$140,000 and we will probably be able to rent it for $800.00 or
$850.00 per
month. We are not going to be putting down a deposit.
2. My husband earns nearly $100,000 and I am going to go back to
work
hopefully part time making $25,000 so I was wondering if the
condo should go
in just his name or does that matter?
If the condo was a legitimate investment for the purpose of
making a rental profit, it would be better in his name if you
have no income and better in both names if you are going to be
making an income.
3. Do you have a recommendation for an accountant in Victoria
with similar
experience to yourself? Do you ever do taxes for clients in
Victoria?
We have many Vancouver Island clients. At the moment, I do not
know of anyone that carries on our tradition on the island.
4. We are going to be making the house mortgage tax deductible
by using a
line of credit to pay for the condo (rental) mortgage. Do we
just keep
letting the line of credit get higher and higher until the
mortgage is paid
off and then pay off the line of credit?
Essentially yes. Read the newsletter and do not be silly about
it. Your Mortgage person should automatically know how to do it.
If he she is having a problem with the concept, drop them now!
Call Joan Marsh at 604-535-9981 - she does a lot of business on
the island and understands the mortgage deductibility part inside
out. In addition, she will likely arrange a loan at the same
rate although I cannot guarantee that.
5. The line of credit is prime + 1.50 and my house mortgage is
prime - 3/4
so I was wondering if this is still a good idea since the
interest is that
much higher for the line of credit?
Yes, read " As Above. "
6. If I start righting off the condo expenses do I always have
to do this?
We are hoping to have my mother live in it later in life and then
she won't
be paying rent?
You have a big problem here. We should do a real cash flow
statement to see what the reality of the figures is.
Thanks in advance for everything David. I listen to you on CFUN
and enjoy
all your information.
Joanne
You are welcome - this is not what you want to hear but better
now than in the future when the CCRA comes down on you like a ton
of bricks.
You have to know the difference and arrange your affairs for
profit.
david ingram - [email protected]
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - (604) 913-9123 www.centa.com
Cell is (604) 657-8451 (10 AM to 10 PM seven days a week)
US / CANADA / MEXICO
Working Visa and Income Tax Specialists
Be ALERT, the world needs more "lerts"
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