Can anyone explain the tax on rental income in Canada?
Hi,
Please could someone help because I am really confused.
I purchased my first rental property 6 months ago. I put about in a 3rd of the value of the property and took the rest out in a mortgage. There were already tenants in the property so they have just carried on. My mortgage plus property taxes equals the amount I am being paid in rent, so basically I am paying all of the bills, etc out of my own pocket.
I am trying to understand whether my investment is worthwhile because I am making a loss at the moment.
i.e. per month
Rental income = $2000
Mortgage payment = $1700
Prop tax = $300
All other bills = $550
Can anyone highlighten me?
Am I making a good investment?
When I file my income tax returns will I recover this loss?
Is there a good Canadian forum anyone can suggest on this subject?
I am new to this, so if someone can give me some simple guidance, I would be very thankful.
A
The interest expense, not the mortgage payment itself, would be used to determine if you are making or losing income for tax purposes.
http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/reporting-income/lines101-170/126/menu-e.html
At this point you have a cash flow deficit. Can you handle that? You may end up making some money if the property value increases, or if you increase the amortization on your mortgage.
Do you live there? If there is a personal element to the property, beware of the reasonable expectation of profit rules.
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