Taxes For Landlords Part 2
In the first post on Taxes for Landlords, we talked about the top portion of form T776 Statement of Real Estate Rentals where you list your revenue and expenses. What I didn’t mention was that if you live in part of the property, then you can only claim the expenses that relate to the rented portion of the property.
This brings us to line 9369 “Net income (loss) before adjustments”. Now I’d like to quickly touch on what comes next on the T776. This is where I let my accountant take over, so I can’t tell you specifically how to fill it out because I don’t know your situation, but I can touch on the high points.
If you co-own the property, then all owners have to report their share of the revenue and expenses for the property. If you and I each own half of the property, and the property earned $1,000 before adjustments, then we would each report $500. Pretty simple, eh?
After that it gets into Capital Cost Allowance (CCA), and recapture of CCA. Since physical assets wear out and become obsolete over time, CCA is a way of accounting for that obsolescence, also known as depreciation. Different types of assets depreciate faster than others and there are special rules on how much CCA you can claim.
As I understand it (feel free to set me straight here), recapture of CCA is when you sell an asset for more than its depreciated book value. You can see why I let my accountant handle this for me. There are other implications that come with selling property, like capital gains or losses, but they are reported elsewhere.
The next line is to report rental income from a legal partnership, as opposed to co-owners who are just two people who share ownership in a rental property. I assume the partnership calculates its net income and then each partner is responsible for reporting their share of the partnership.
Then we get to a line for GST/HST rebates, which I’ve never used.
Unless you’re smarter than me, or are a tax professional, or both, do like me, and have a tax professional take care of the hard parts for you. I save my accountant time by filling out the top part and let them do the bottom part. In this instance I prefer to pay a little extra to save me beating my head against a wall trying to figure it all out. Like Ace Rothstein said in the movie Casino “You can either have the money and the hammer or you can walk out of here. You can’t have both.” (the hammer = pain)
