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TorontoMike$$ said:
I am not a realtor

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/rntl/bt/rprt/xpns/menu-eng.html

Expenses that can be deducted at 100% to offset rental and/or other income (if expenses are more than rental income).

You guys should not be giving any advice .. especially real estate or tax. Advice on how to rent ..maybe.
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I think you are misinterpreting the CRA site.

You are allowed to deduct 100% of the expenses against taxable income... so for income tax purposes, you can save the tax component of this loss on a future year. So if you lost $10,000 in vacancy costs, when you DO end up generating income of let's say, $60,000, you only pay tax on $60,000 LESS $10,000 of your losses. Therefore, you save $10,000 * tax rate, not the full $10,000.

Let me show you another visual example of what happens (http://imgur.com/a/qnXAu). Note that the taxes payable amount decreases by LESS than the $2,000 loss that you incurred. The difference between $2,000 and the tax savings is an actual loss to you.

I'm not a tax specialist by any means... but I have enough experience working in tax to be pretty confident in the above...
 
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TorontoMike$$ said:
I am not a realtor

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/rntl/bt/rprt/xpns/menu-eng.html

Expenses that can be deducted at 100% to offset rental and/or other income (if expenses are more than rental income).

You guys should not be giving any advice .. especially real estate or tax. Advice on how to rent ..maybe.
Click to expand...

There is a saying, at least in England,where I lived for a few years when I was a Spring chicken, that little knowledge is a dangerous thing.

So goes with your knowledge of Income Tax.

You and CRA are correct that losses from investment property, that includes rental losses, can be offset against other income and temporarily reduce your taxes payable. However, you are missing the flip side of the coin -- something called CNIL: Cumulative Net Investment Losses.

Let's say, you had a loss from rental operations of, say, $ 5,000. You can deduct this loss against other income and reduce your taxes otherwise payable.

Let's say that over a period of 5 years you had accumulated net losses of, say, $ 20,000. If at the end of the 5 year period, you sell rental property and had a gain of, say, $ 100,000. Out of this gain, $ 20,000 will be included in your income and taxed at full rates. Balance of $ 80,000 will be a capital gain and tax accordingly. Tax on this full amount of $ 20,000, in year 5, could be more than the taxes saved over the 5 year period.

Now, let's re-start the conversation on keeping a rental property empty and write off losses against other income.
 
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You can use the vacancy losses to offset other income for example T4 .. employment or commission income.

I am not referring to capital gains.


Party Penguin said:
I think you are misinterpreting the CRA site.

You are allowed to deduct 100% of the expenses against taxable income... so for income tax purposes, you can save the tax component of this loss on a future year. So if you lost $10,000 in vacancy costs, when you DO end up generating income of let's say, $60,000, you only pay tax on $60,000 LESS $10,000 of your losses. Therefore, you save $10,000 * tax rate, not the full $10,000.

Let me show you another visual example of what happens (http://imgur.com/a/qnXAu). Note that the taxes payable amount decreases by LESS than the $2,000 loss that you incurred. The difference between $2,000 and the tax savings is an actual loss to you.

I'm not a tax specialist by any means... but I have enough experience working in tax to be pretty confident in the above...
Click to expand...
 
Thanks CN for yet another great example - if you think like this guy you will never get ahead and will be bitter of people that get ahead.
 
TorontoMike$$ said:
You can use the vacancy losses to offset other income for example T4 .. employment or commission income.

I am not referring to capital gains.
Click to expand...

Same idea though, isn't it?

Offsetting your employment income is still just saving you <loss> * <marginal rate>, meaning that you're still losing money after tax
 
CN Tower said:
tombstone for all to know his monumental stupidity.
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I'm not in the property game, or any game, so my experience of how to manipulate assets is slight. However, I have come to believe that just because something is monumentally stupid doesn't mean it won't be done, and that some people will be able to rig that stupidity to benefit themselves. Look back to 2008, when mortgages were offered to people who couldn't pay in order to create debt to dice and sell on the investment market. Stupid in hindsight, but homebuyers thought they were moving up, and those at the top for a time became crazy rich.

I don't know if it matters if units are left completely vacant, or if they're second or third or fourth homes occupied by members of the owner's family for six weeks of the year. It still means that much of the building boom is targeted at wealthy elite from here and elsewhere while there's little to no progress on making housing more affordable for middle and working class families and others.
 
typezed said:
I'm not in the property game, or any game, so my experience of how to manipulate assets is slight. However, I have come to believe that just because something is monumentally stupid doesn't mean it won't be done, and that some people will be able to rig that stupidity to benefit themselves. Look back to 2008, when mortgages were offered to people who couldn't pay in order to create debt to dice and sell on the investment market. Stupid in hindsight, but homebuyers thought they were moving up, and those at the top for a time became crazy rich.

I don't know if it matters if units are left completely vacant, or if they're second or third or fourth homes occupied by members of the owner's family for six weeks of the year. It still means that much of the building boom is targeted at wealthy elite from here and elsewhere while there's little to no progress on making housing more affordable for middle and working class families and others.
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Apples to oranges.

While TorontoMike-$$ is just a grapefruit.
 
To TorontoMike$$

As per party penguin:

You are allowed to deduct 100% of the expenses against taxable income... so for income tax purposes, you can save the tax component of this loss on a future year. So if you lost $10,000 in vacancy costs, when you DO end up generating income of let's say, $60,000, you only pay tax on $60,000 LESS $10,000 of your losses. Therefore, you save $10,000 * tax rate, not the full $10,000."

I believe this is exactly the way it works. The point being that you save the tax but you still have your share of the loss.

I am not an accountant either and would not give tax advise but I am quite sure this CN Tower/Party Penguin and I are correct.

Maybe an accountant will confirm if there is one on the forum.
 
interested said:
Maybe an accountant will confirm if there is one on the forum.
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Yes, your calculations are correct. You may not be an accountant but your knowledge about tax implications is almost as good as that of an accountant.

See my post # 8942 above about the day of recokening when eventually a property is sold.
 
This is based on the narrow minded assumption that the only source of income for an individual is rental. My scenario described using these losses to reduce other types of income.. like T4. So for simplicity sake if you made 100k of taxable income you would pay tax on 90k. If you had no other income to deduct from THEN you would have no option but to carry forward.

Also, if you pair that with additional deductions like gas, vehicle, home office etc.. it can be very beneficial from a tax perspective.

interested said:
To TorontoMike$$

As per party penguin:

You are allowed to deduct 100% of the expenses against taxable income... so for income tax purposes, you can save the tax component of this loss on a future year. So if you lost $10,000 in vacancy costs, when you DO end up generating income of let's say, $60,000, you only pay tax on $60,000 LESS $10,000 of your losses. Therefore, you save $10,000 * tax rate, not the full $10,000."

I believe this is exactly the way it works. The point being that you save the tax but you still have your share of the loss.

I am not an accountant either and would not give tax advise but I am quite sure this CN Tower/Party Penguin and I are correct.

Maybe an accountant will confirm if there is one on the forum.
Click to expand...
 
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TorontoMike$$ said:
This is based on the narrow minded assumption that the only source of income for an individual is rental. My scenario described using these losses to reduce other types of income.. like T4. So for simplicity sake if you made 100k of taxable income you would pay tax on 90k. If you had no other income to deduct from THEN you would have no option but to carry forward.

Also, if you pair that with additional deductions like gas, vehicle, home office etc.. it can be very beneficial from a tax perspective.
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I am sorry Mike but I do not believe you are correct.


No one wants a real loss to get a tax loss. For e.g., if I have a property that is in a loss of $10K after expenses and one that has $10K profit after expenses, I will have a net zero income. However, if I did not have the property in the loss situation and only the one that was in profit, I would have $10K profit and I would have $5K left over after tax assuming a 50% tax rate(for simplicity I have assumed 50%). The same would apply if I had $100K income on my T4 and I had a real $10K loss, I reduce income to 90K...pay tax of $45K(in fact somewhat less tax but for simplicity I am continuing with 50%) Still have a $5K real loss in my Net takehome amount.

Sure you can get deductions like gas, vehicle, home office etc. but assuming these are legitimate expenses you actually spend the money on the gas and vehicle with the wear and tear, getting 1/2 of it back still means you have paid 1/2. Now as to the home office...true you could deduct some of your home office and even some of your house expense on a prorata basis so long as you can justify that the office is solely used for the purpose of doing your business. Everything will be fine until you are audited but then if you can't show that, likely I would expect the deduction would be disallowed. Most people don't get audited and you are assumed to be honest and forthright in your dealings. However, I agree you do get some deductions but the only way it makes sense is if you have deductions on things that were not deductible before. I highly doubt you could get to 50% or more of these "legitimately" based on running properties in a loss situation.

By the way, Ka1, an accountant in post 8591 would appear to agree with the rest of us about the loss against income.
 
TorontoMike$$ said:
This is based on the narrow minded assumption that the only source of income for an individual is rental. My scenario described using these losses to reduce other types of income.. like T4. So for simplicity sake if you made 100k of taxable income you would pay tax on 90k. If you had no other income to deduct from THEN you would have no option but to carry forward.

Also, if you pair that with additional deductions like gas, vehicle, home office etc.. it can be very beneficial from a tax perspective.
Click to expand...

I sincerely hope nobody falls for your terrible advice.
 
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