Prepare for a Successful Tax Season

Prepare for a Successful Tax Season

Prepare for a Successful Tax Season

  • Posted by Member Services
  • On February 28, 2024

Tax season is officially upon us in Canada. February 19 was the first day Canadians could file taxes, with the deadline set to Tuesday, April 30. Tax season may seem daunting, luckily there are tools that can help you.

Our friends at Virtus Group have a suite of Tax Resources, and a Personal Tax Checklist you can use to help file your taxes this year. In addition, they were able to share some useful information on how rental housing providers and small landlords can weigh the option of owning the rental property personally, or look at the tax implications of owning the rental property through a corporation. You can read their blog, Owning Rental Properties in Canada: Corporation vs. Personal Ownership and Tax Implications here. We have summarized some of the information here.

The decision to own rental properties within a corporation or personally is multifaceted and depends on your unique financial situation and objectives. While owning rental properties within a corporation can offer tax advantages, it also comes with added complexity and requires diligent tax planning. Personal ownership, on the other hand, may result in a higher tax burden but is often simpler to manage.

When you own rental properties personally, the rental income is added to your personal income each year and reported on a rental schedule of your personal tax return. This income is taxed at your marginal tax rate, which could potentially result in a higher tax burden when it is added to your other sources of income. When a corporation owns a rental property, it will generate rental income. The corporation can deduct eligible expenses, such as property maintenance, mortgage interest, property taxes, utilities, and property management fees from its rental income to determine its taxable rental income.

Other things to consider are deductions and expenses, You can deduct eligible expenses related to the rental property, such as mortgage interest, property taxes, maintenance costs, insurance, property management fees, utilities and more, that are paid by you, to reduce your taxable rental income. However, the deductions are limited by specific rules and subject to scrutiny by the CRA. You should also consider the Capital Cost Allowance and Capital Gains Tax. If you own the rental through a company, you may see the potential for tax rate savings, opportunities for tax-deferred growth, and offer asset protection.

Rental property losses in a corporation may not provide the same immediate personal tax benefits as they would if the property were owned personally. Corporate losses can be carried forward to offset future rental income or carried back for up to three years to offset past rental income and recover income taxes that have been paid, but they cannot generally be used to reduce other forms of income for the shareholders. In Canada, certain rules aim to prevent the accumulation of passive investment income as a corporation and may be subject to higher corporate tax rates. Rental income is generally considered to be passive income.

When it comes to filing taxes, we know that this can be a daunting, often time-consuming task. To simplify your tax filing experience, Virtus Group has compiled the key tax filing and payment deadlines for the middle-market taxpayers. By filing the tax return(s) and paying the taxes due on time, taxpayers can avoid delays to any refund, benefit, or credit payments they may be entitled to. In addition, complying with the due dates will help to avoid late-filing and/or late-payment penalties and interest. Click here to read their full article, which can serve as a one-stop solution for keeping track of key tax deadlines approaching.

Virtus Group is a service partner of the Association that has a wealth of knowledge and expertise available to our members. Visit their website to learn more.