Personal Finance

rental property // in-house office

  • Last Updated:
  • May 20th, 2010 9:02 pm
Tags:
None
[OP]
Newbie
Jul 10, 2007
6 posts
1 upvote
Winnipeg

rental property // in-house office

I have two rental properties.

I live in a different house, and they told me that i can claim a portion of the expenses of my residential house as a home office (proportion of hydro, internet, water, mortgage interest, etc)

I still have to fill the tax return of 2010 and i can not find were to claim such expenses.

Can someone give me some hints?

THANKS!!
9 replies
Deal Addict
Dec 28, 2006
2378 posts
64 upvotes
Saskatoon
Hint # 1: You don't file your 2010 return until 2011.

Hint # 2:

Sec. 18(12) specifies that:

(a) no amount shall be deducted in respect of an otherwise deductible amount for any part (in this subsection referred to as the "work space") of a self-contained domestic establishment in which the individual resides, except to the extent that the work space is either

(i) the individual's principal place of business, or

(ii) used exclusively for the purpose of earning income from business and used on a regular and continuous basis for meeting clients, customers or patients of the individual in respect of the business;



Notice the key word "BUSINESS". Rental income is income from PROPERTY, not business.


However, I have seen rulings letters that indicate that an expense claim would be acceptable under Sec. 18(1)(a) provided that a reasonable basis is used.

So if you have a home office that is 10% of the square footage of your house, and you are using it one hour a week to do bookkeeping etc. you would have to pro-rate your household expenses on that basis.

Let's say you have $1000 in house hold expenses:

$1000 x 10% x (52hrs a week / 8760 hours in a year) = $0.59 in deductable expenses.

Is 59 cents in deductable expenses even worth the effort to keep track of? Even if you had $10,000 in gross expenses you still only end up with $5.90 in deductable expense.

So my question to you would be, if you spend a hour every year calculating this expense and all you get is a couple of bucks, is it worth the bother?
Deal Addict
User avatar
Sep 26, 2007
3960 posts
146 upvotes
SC
are you self employed?

mortgage interest is normally not tax deductible in canada afaik. see smith manoeuvre to get around it...

i get the feeling you will be paying a lot of taxes, plus late fee and interest.
i would advise you to speak to a professional. it might save you more then if you figure it out yourself and incur more interest and/or miss something.
Deal Addict
Dec 28, 2006
2378 posts
64 upvotes
Saskatoon
xlfe wrote: are you self employed?

mortgage interest is normally not tax deductible in canada afaik..

Mortgage interest is allowed under business use of home expenses.


http://www.cra-arc.gc.ca/tx/bsnss/tpcs/ ... m-eng.html

You can deduct a part of your maintenance costs such as heating, home insurance, electricity, and cleaning materials. You can also deduct a part of your property taxes, mortgage interest, and capital cost allowance. To calculate the part you can deduct, use a reasonable basis such as the area of the work space divided by the total area of your home.

If you use part of your home for both your business and personal living, calculate how many hours in the day you use the rooms for your business, then divide that amount by 24 hours. Multiply the result by the business part of your total home expenses. This will give you the household cost you can deduct.

If you run the business for only part of the week or year, reduce your claim accordingly.
[OP]
Newbie
Jul 10, 2007
6 posts
1 upvote
Winnipeg
I am the one that open the thread;

ghostryder: i am late in my 2010 tax return

Also, i had the same idea about proportional use, but without the hour proportional. An accountant filled a friend's tax in similar situation than mine, and he deducted 20% of the home expenses (5 room house, one room dedicated as home office)

xlfe: i am full time employee.
I made my return using quicktax, and i have a return, that is is why i am not in a real rush to fill it.


Thank you all for your input
Deal Addict
Feb 5, 2009
2808 posts
928 upvotes
Newmarket
I would advise against claiming home office expenses in this situation, you are asking for audit imo.

Rental income as already mentioned is treated differently than business, and many home based business use portion of their homes to run their business, it has became so common that cra rarely asks for proof as long as the numbers look reasonable.

Using the space for rental income is a whole different story, first of you run a risk of being audited since it will raise a flag, and when it does you will have no chance in hell reasonably proving that 20% of your house was used for this purpose.

Please let us know when your friend gets audited.
Deal Fanatic
User avatar
Feb 19, 2010
6237 posts
2968 upvotes
pplui wrote: I am the one that open the thread;

ghostryder: i am late in my 2010 tax return
No. No you're not.

Your 2010 return is due by the end of April of 2011. You're likely referring to the filing of your 2009 return which was due April 30 of 2010.

One other thing you should know for future reference. If it is on the subject of taxes, listen to ghostryder. He knows his stuff.
[OP]
Newbie
Jul 10, 2007
6 posts
1 upvote
Winnipeg
Conquistador wrote: No. No you're not.

Thanks for the advise, but i can not understand why you are saying that i am not the one that opened the thread.
Sr. Member
Jul 29, 2009
895 posts
14 upvotes
Conquistador wrote: No. No you're not.

Your 2010 return is due by the end of April of 2011. You're likely referring to the filing of your 2009 return which was due April 30 of 2010.

One other thing you should know for future reference. If it is on the subject of taxes, listen to ghostryder. He knows his stuff.
pplui wrote: Thanks for the advise, but i can not understand why you are saying that i am not the one that opened the thread.
He's saying you're not late in filing your return for the 2010 tax year. You're late filing your 2009 taxes.
Deal Addict
Dec 28, 2006
2378 posts
64 upvotes
Saskatoon
Conquistador wrote: One other thing you should know for future reference. If it is on the subject of taxes, listen to ghostryder. He knows his stuff.
:) Thanks


I'm going to have to use this as my signature. Usually I get criticized.

Top