Tax and Accounting Tips for Real Estate Investors

Tax and Accounting Tips for Real Estate Investors

 In Real Estate

Welcome!  My name is Joseph and I am the founder of Rethink CPA.  I am both a CPA and licensed mortgage professional with over a decade of experience in helping my clients achieve their real estate goals.  Clients often come to me with questions on obtaining funding, improving tax efficiencies and how to manage the recordkeeping that comes with being a landlord.  And so, I have put together some useful tax and accounting tips for the real estate investors out there.

Expense Checklist

Not sure what expenses you can deduct?  Here is a handy list:

  • Interest (mortgage, HELOC, etc.)
  • Property management & condo fees
  • Accounting & legal fees
  • Repairs & maintenance*
  • Property taxes
  • Utilities
  • Insurance
  • Office expenses
  • Realty commissions
  • Advertising
  • Travel expenses

*Extensive renovations are subject to special rules.

Recordkeeping Tips

  • Generally, CRA requires that records and supporting documents be kept for 7 years.
  • Keep personal and rental records separate. If possible, maintain different bank accounts and credits cards.
  • Do not overlook the importance of retaining your own documents to supplement the property management report.
  • Bookkeep throughout the year. This will reduce the stress of “catching up” at tax time. Up-to-date records can also help you plan your cashflows to pay for any taxes owing.

Should I Incorporate?

Unfortunately, there is no standard answer to this question. The decision to incorporate is dependent on your specific financial and tax situation. Some factors to consider include:

YES

  • Potential tax planning and tax deferral opportunities within a corporation
  • Lower corporate tax rates
  • Separate legal entity

NO

  • Greater start-up costs
  • Annual corporate tax filings
  • Rental income earned personally increases RRSP room
  • Rental loss can be used to reduce personal tax on other sources of income

Short-Term Rentals and HST

  • Short-term residential rentals of less than one month are subject to HST.
  • Registration for an HST number is required once gross annual rental revenue exceeds $30,000.
  • Registrants are required to collect HST from tenants and input tax credits (“ITC”) can be claimed for HST paid on qualifying expenses.
  • The difference between the total HST collected less ITC’s is the amount owing to CRA. If the difference is negative, a refund can be applied for from CRA.
  • It is important to keep track of HST and ITC components separate from related income and expenses.
  • More information about how to register for a HST account can be found on CRA’s website.

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