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Taxes (pg. 6)
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| rabbitjoker |
| quote: | Originally posted by tw1tch
No, but it is taxed at a significantly lower level than earned income. |
Firstly - you cannot use your capital cost allowance (CCA) (depreciation) to create a rental income loss. Investments/businesses are made to make money - and the CRRA becomes highly suspect of they see perpetual losses on a large investment / business.
Secondly - rental income is treated as regular cash income and taxed as such (less expenses + CCA). The rental income is taxed at your full tax rate.
Thirdly - the sale of a home triggers CAPITAL GAIN income - and is taxed less than your regular income bracket (I believe 40% of your reguar income tax rate). The capital gain is only triggered on the sale of the asset.
Read CCRA T4036 for details. |
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| StereoPrincess |
| quote: | Originally posted by Mosaic
just curious:
any high school students besides me filing returns? |
I have been filing since about grade 10. Pretty much since I had a job.
Like RJ said, its good to increase your possible RRSP contribution in the end. |
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| j_spot |
I will summarize
-I got money
-I paid money
bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla bla |
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| tw1tch |
| quote: | Originally posted by rabbitjoker
Firstly - you cannot use your capital cost allowance (CCA) (depreciation) to create a rental income loss. Investments/businesses are made to make money - and the CRRA becomes highly suspect of they see perpetual losses on a large investment / business. |
I didn't say you could create a loss, but you can absolutely use the depreciation of the house against your taxes. From T4036
"You might acquire a depreciable property, such as a building, furniture, or equipment, to use in your rental operation. You cannot deduct the cost of the property when you calculate your net rental income for the year. However, since these properties wear out or become obsolete over
time, you can deduct their cost over a period of several years. The deduction for this is called capital cost allowance (CCA)."
Not to mention the large number of other expenses you can write off by owning a property or numerous properties.
| quote: |
Secondly - rental income is treated as regular cash income and taxed as such (less expenses + CCA). The rental income is taxed at your full tax rate. |
Weighed against the write off's you have with a property, I'd say my statement is still true. I believe if I'm seeing $2000/month in gains, I can write off up to $2000 (without going over to make it a loss). So I'd say my $2000 is taxed quite differently then $2000 of earned income.
| quote: |
Thirdly - the sale of a home triggers CAPITAL GAIN income - and is taxed less than your regular income bracket (I believe 40% of your reguar income tax rate). The capital gain is only triggered on the sale of the asset. |
If your intention is to sell it, then that's a valid point. I may not intend to sell it. I also believe there is a way of taking those capital gains tax free and investing those in another property if I'm not mistaken. |
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| Frevian |
the library has a lot of good books you should all take a look
http://www.tpl.toronto.on.ca
Here are some from a quick search:
The 10 secrets Revenue Canada doesn't want you to know /
by Voth, David M., 1958-
Liberty House Publishing,
2002.
Tax tips for Canadians for dummies /
Wiley,
2003.
Tax savings for the long run : how to work with your tax advisor for maximum gain /
McGraw-Hill Ryerson,
c2003. |
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| rabbitjoker |
| quote: | Originally posted by tw1tch
Weighed against the write off's you have with a property, I'd say my statement is still true. I believe if I'm seeing $2000/month in gains, I can write off up to $2000 (without going over to make it a loss). So I'd say my $2000 is taxed quite differently then $2000 of earned income. |
I agree 100% with the above - BUT:
If you have $2000 coming in and $2000 of expenses - your net gain on cashflow is $0. So if the objective is cashflow - the above senario doesn't make sense
However - you will have the asset of the property - but when you sell it you'll be taxed.
If you really don't have $2000 in expenses but your claming $2000 - that's fraud. I won't condone that.
| quote: | | If your intention is to sell it, then that's a valid point. I may not intend to sell it. I also believe there is a way of taking those capital gains tax free and investing those in another property if I'm not mistaken. |
Your principle residence is not subject to capital gains upon sale. Unfortunately investment properties are not considered to be your principle residence.
But back to the original point: RRSPs are the single -best- way to mass a significant amount of money for retirement and deferring the taxes until that time - when presumably you'd be in a lower tax bracket. |
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| JRinger |
| quote: | Originally posted by rabbitjoker
But back to the original point: RRSPs are the single -best- way to mass a significant amount of money for retirement and deferring the taxes until that time - when presumably you'd be in a lower tax bracket. |
actually no - having a fully employer-paid pension plan is the best way (from a cost-to-you standpoint)....RRSPs would closely follow that |
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| MarkT |
who cares if income is tax free??? That's 100% irrelevant. ALL that matters is your ratio of income to expenses when you retired (or anytime, for that matter).
you could have 3k/month from RRSPs, after tax, but if my rental properties or business income gross me 6k month after expenses at even at a 45% tax rate, and with zero RRSPs, who's financially better off? me! :)
What RRSPs offer is secure, consistent income upon retirement, but not necessarily the highest income ;)
I'll spare everyone the details of my landlord's situation...suffice to say, he and his wife have 8 properties and have to do virtually nothing day to day to generate that income, PLUS they still work (in their 50's, I suspect). They will retire quite comfortably and probably have RRSPs for the tax break, not with the intention of ever needing them to live. |
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| Skipper |
| quote: | Originally posted by MarkT
who cares if income is tax free??? That's 100% irrelevant. ALL that matters is your ratio of income to expenses when you retired (or anytime, for that matter).
you could have 3k/month from RRSPs, after tax, but if my rental properties or business income gross me 6k month after expenses at even at a 45% tax rate, and with zero RRSPs, who's financially better off? me! :)
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You're forgetting about the time value of money. |
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| tw1tch |
| quote: | Originally posted by MarkT
I'll spare everyone the details of my landlord's situation...suffice to say, he and his wife have 8 properties and have to do virtually nothing day to day to generate that income, PLUS they still work (in their 50's, I suspect). They will retire quite comfortably and probably have RRSPs for the tax break, not with the intention of ever needing them to live. |
It's called passive income. Sit at home with your thumb up your ass and you still get paid. Most people can't say the same, as they have to earn their money by working for it, day in and day out for the rest of their normal working lives. What your landlords have done is essentially retired young. I call it retirement, the day you can do what you want and not care about the paycheque is retirement to me. They could stop working if they wanted, or continue, it's their choice. The majority of people will never have that. They will work until they're 60 or so and HOPEFULLY, live off their RRSP. You'll need a good couple million (in your RRSP), minimum if you want to enjoy life after you retire. |
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| Fir3start3r |
| quote: | Originally posted by rabbitjoker
But back to the original point: RRSPs are the single -best- way to mass a significant amount of money for retirement and deferring the taxes until that time - when presumably you'd be in a lower tax bracket. |
I wouldn't say 'best'.
Best for people who know nothing else which in fact, would be -best- because it's better than nothing.
Don't get me wrong RJ, you did awesome to get that 28%.
RRSPs do provide immediate benefits from income tax deferral (which is exactly what we want) but it certainly isn't the only thing a person can do to defer taxes and is always the soup-de-jour being pushed by banks this time of year because they think we don't know any better.
A smart choice for some, but not necessarily for all...:toocool: |
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| rabbitjoker |
| quote: | Originally posted by JRinger
having a fully employer-paid pension plan is the best way (from a cost-to-you standpoint) |
Very true. Not common however. |
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