Top 10 Tax Savings Tips for Canadian Real Estate Investors​

Following are Top 10 Tax Savings Tips for Canadian Real Estate Investors​:

  • Don’t exaggerate your home office expenses. This is a red flag for the CRA. There are always exceptions, but a good rule of thumb is a maximum of 25 per cent as the business share of heat, hydro, property taxes and so on. ​

  • Keep a careful log of car expenses. This is another red flag for CRA. ​

  • If you run into trouble or make a mistake, call the CRA. Most times they will be very helpful, especially if you call before the crunch.   ​

  • Whatever you do, don’t ignore communications from the CRA, respond promptly and make notes of your conversation right on the letter for future reference. ​

  • Unless you are incorporated you are required to complete a Statement of Business and Professional Activities (T2125) at he same time as you file your personal taxes. ​

  • Don’t wait until the last minute. It’s impossible to get yourself properly organized under eleventh-hour time pressure and it’s difficult to make good decisions to minimize your taxes. ​

  • Make an estimate of your expected tax bill. If your revenue is going to be high, you might consider making that machinery or computer purchase before year’s end. You’ll defray some of the expense through capital cost depreciation, says Cleo Hamel, senior tax analyst with H & R Block Canada.

  • You should set aside 30 to 40 per cent of your gross income to cover income tax and CPP.   Even if you are the only employee of your business, you are responsible for paying the employee and the employer CPP contributions. ​

  • Keep proper records differentiating business from personal. If you can’t prove it, the CRA will likely assume the expense is personal. Hamel recommends that you slot your expenses into the categories provided by CRA on the T2125. “Whatever you do, don’t have a large ​

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The top 10 reasons to set up a trust

If you hang around a lawyer’s convention, you might notice a couple
of things:

(1) There are many smiling, courteous people (those are
often the caterers), and

(2) that trusts are given different names.

There are family trusts, insurance trusts, cottage trusts, Henson trusts, irrevocable life insurance trusts, qualified domestic trusts,
spendthrift trusts, charitable remainder trusts, purpose trusts and many other types of trusts.

What makes each of these trusts different? Their purpose. The reason for setting up the trust in the first place – is critical to
understand, and that will dictate what the wording of the trust agreement will look like.

Let’s take a look at the top 10 reasons why you might consider setting up a trust:

Managing assets1. Managing assets

If your beneficiaries don’t have the capability or desire to manage the assets you’ll be giving them, having trustees manage those assets can solve the problem. Perhaps your kids are minors, or have a disability. You may want to manage the assets while you’re alive, but when you’re gone, a trust can provide proper management if necessary.

Protecting assets2. Protecting assets

If you want to protect assets from creditors, marriage breakdown or from those who might influence your beneficiaries, a trust can be an effective vehicle. Be aware that there is “fraudulent conveyance” legislation that could prevent you from transferring assets to a trust
to avoid claims in some cases – speak to a lawyer about it.

Controlling distributions3. Controlling distributions

If you don’t trust your beneficiaries to directly own the assets you want them to
have (perhaps because they are minors or spendthrifts), you can distribute assets to them over time through a trust.

Providing privacy4. Providing privacy

After your death, your will is likely to be probated. In this case, your will becomes a
public document, along with the value of the assets that formed your estate. Further,
certain people may be entitled by law to receive a copy of your will. A trust agreement,
however, is a private document and can keep
information confidential. Some people replace
their wills with a trust.

Avoiding compulsory succession5. Avoiding compulsory succession

If someone feels that they were treated unfairly in your will, a legal
battle could ensue. In some cases, it may be possible for your will to be varied (changed) – called “compulsory succession.” A properly drafted trust can be
watertight so that challenges to your wishes may be avoided.

Multiplying tax exemptions6. Multiplying tax exemptions

It’s possible to use a trust to access the lifetime capital gains exemption (LCGE)
or the principal residence exemption (PRE), even where it would otherwise be
impractical to do so. For example, if a trust owns shares of a qualifying small business corporation, it may be possible to utilize the $800,000 LCGE of each beneficiary. Similarly, if a trust owns a residence, it may be possible to shelter a sale from tax using the PRE, as long as
at least one beneficiary ordinarily inhabits the home.

Saving taxes7. Saving taxes

It’s also possible to save taxes in other ways. For example, it’s possible to split income with lower-income beneficiaries by allocating income of the trust to those beneficiaries to be taxed at their lower rates (though there are some exceptions). In addition, testamentary trusts, created in your will upon your death, have in the past allowed beneficiaries to save tax by taking advantage of the low graduated rates of tax available to those trusts. This week’s federal budget eliminated the long-term benefit of testamentary trusts for this purpose, but they can still offer these graduated tax rates for the first three years following your death, after which the trust will be subject to the highest marginal tax rate, causing the tax benefits to disappear. It may also be possible to avoid provincial surtaxes using a trust, if your province levies surtaxes.

Avoiding probate8. Avoiding probate

Assets held in a trust fall outside of your estate and, therefore, do not require
probate or the payment of probate fees.

Preserving disability benefits9. Preserving disability benefits

If a beneficiary is eligible for certain disability plan payments in your province, it’s possible that those benefits can be eroded under a
means test if there are assets in his name or set aside for him. A properly worded trust can be used to hold assets for the beneficiary
while still meeting the requirements of your province that will entitle him to receive those payments. This is often called a “Henson
trust.”

Helping charity10. Helping charity

A trust can be set up with the purpose of
providing gifts to charity.

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Tax Savings Strategies in General and Family​

Lifetime Capital Gains Exemption (LCGE)

  • The LCGE is increased for indexation to $813,600 for 2015. Quebec announced an increase in their LCGE to $1 million for qualified farm and fishing property for 2015 and later years.Lifetime Capital Gains Exemption (LCGE)​

Share your incomeShare your income

Many government benefits are income tested so transferring income to a lower-income spouse may help the higher-income spouse reduce taxes and get more. ​​

For instance, if both of you are 60 or older and receiving CPP payments, the higher-income spouse can elect to attribute up to 50% of his or her CPP income to the lower-earning spouse.

Medical expensesMedical expenses

This year, costs for the design of personalized therapy plans for those eligible for the disability tax credit and the cost of service animals used to help those with severe diabetes can now be claimed. ​

Be sure to claim your medical expenses on the tax return of the lower income spouse. ​​

This could save you more tax since your claim is limited to $2,171 (for 2014) or three per cent of net income, whichever is less.

Transit passTransit Pass

If it covers at least 28 consecutive days you can claim 15% of the value—and there’s no limit on how much can be claimed. ​

GST/HST creditGST/HST credit​​​​

If you’re entitled to the GST/HST credit paid based on family net income, it used to be that you had to apply for the credit on your tax return. No longer. ​​

When you file your tax return, Canada Revenue Agency (CRA) will now determine your eligibility and will tell you if you are entitled to the credit.​

​​Legal fees to collect unpaid rentLegal Fees To Collect Unpaid Rent

Generally may be are deductible only if they are  related to collecting the unpaid rent.​

Property transferred from parent to childProperty Transferred  from Parent to Child

The parents can transfer their properties to child at any time at the Fair Market Value.​​

 Income attribution rules will be applied to the minors (who cannot own property anyway)​

Ontario tax creditsOntario Tax Credits

The low income families and the student who are living away from home and are paying rent are eligible to receive up to $1000 upon entering the year’s property tax or the rent being paid in Ontario.​​

Home office expensesHome Office Expenses

Where there is a home used for the business then there may be a home office expense based on the % area used divided by the total area of the home to be applied for the total home expenses (but cannot claim the expenses if the business shows a loss)​

​Claim your Home or Vacation Property as Principal Residence to save Capital GainsClaim your Home or Vacation Property as Principal Residence to save Capital Gains

If the appreciation in value is greater than the home you live in, then you can name the vacation home as the principle residence for purposes of the tax free gain on sale.

(Can only have one principal residence)​

Investment income earned in a corporationInvestment income earned in a corporation

1/3 of the tax  paid is refundable to the corporation upon the payment of taxable dividends.

CRA and income tax auditsCRA and income tax audits

The rental losses for 3 years or more are high audit risk for CRA and the invoices which are not stamped “PAID” , could be rejected as tax deductible receipts. ​​

Cancelled checks are not accepted as receipts.​

Medical expensesMedical expenses

You may be able to claim a non-refundable tax credit based on the cost of medical expenses for any 12 month period.​​

Pool your donationsPool your donations

The amount you donate is eligible for both federal & provincial donation tax credits. Once you have made at least $200 of donations in any year, the donation credit jumps to 29% federally, and between 11% and 21% provincially. ​​

If you are married then you can pool your donations when you file your return.

Claim The Canada Employment ​AmountClaim The Canada Employment ​Amount

The Canada employment amount was introduced in 2006 to give Canadian a break on what it costs to work , including expenses such as home computers etc. ​​

For 2015, the employment amount is  equal or lesser of $????

Write off your kidsWrite off your kids

  • You have a children under 16 in 2015 then parents can claim up to $500/year for eligible fitness expenses paid for each child. ​​

  • Don’t forget to claim the “child amount” of $2089 for each child under the age of 18 in 2015​​

​Foreign Income Verification StatementForeign Income Verification Statement

  • Canada Revenue Agency advises that if you know you won’t be able to get a slip by the due date, simply attach a note  to your return stating the payer’s name & address, the type of income involved. Use pay stubs to estimate the amount to report. ​​

Tax Savings StrategiesFile On Time Before Midnight April 30​

If you file your return late, there is an automatic 5% penalty on the amount of tax unpaid plus an additional 1% /month penalty on the amount due each month the return is late, up to a maximum of 12%.Late filters are also subject to non deductible arrears interest.​

Tax Savings StrategiesAvoid that refund

Under the Tax Act , it is possible to get your tax refund throughout the year, on every pay check, instead of waiting until your return is filed. Apply using CRA Form T1213,”Request to Reduce Tax Deductions at Source.”​

Tax Savings StrategiesChildren’s Fitness Tax Credit​

Government of Canada allows a non-refundable tax credit based on eligible fitness expenses paid by parents to register a child in a prescribed program of physical activity.

Tax Savings StrategiesDividends from Canadian Corporation​

Don’t miss out on the following tax saving ideas: ​​

  • Income splitting with your partner and children.​
  • Investing the child tax benefit payments in your children’s names.
  • Issuing shares to your partner or children in a family owned business. ​

Dividends from Canadian Corporation

  • Investing the child tax benefit payments in your children’s names. ​

  • Deducting interest expense on money borrowed to purchase investments or invest in a family business.​

  • Deducting the interest paid to purchase Canada Savings Bonds on the payroll plan at work. ​

  • Deducting your safe deposit box fees. ​

  • Deducting accounting fees paid to calculate the investment income reported on your tax return. ​

  • Deducting the interest paid on your margin account. ​

  • Review in detail the charges on your brokerage accounts for any possible interest or other fees paid that may be deductible. Look for accrued interest charges on bonds and similar investments purchased. ​

Tax Savings StrategiesInvest Inheritance In Separate Names​

A spouse with a lower income who receives an inheritance should be investing it in a separate account, so any investment return is taxed solely in the lower income spouse’s hands. ​​

Investing it in joint accounts would result in higher taxing.

Tax Savings StrategiesSplitting Income

Starting this year you’ll have the ability to claim the “Family Tax Cut” credit.​​

This credit will allow you to save up to $2,000 in taxes by effectively shifting part of the tax burden from a higher-income spouse or common-law partner to the one with a lower income. ​​

You’ll have to meet the criteria, and complete Schedule 1A, which has all the details.​

Adoption expensesAdoption expenses

  • If you’re adopting, or have adopted, a child who is under 18 years of age, you may be able to claim up to $15,000 of adoption expenses (up from $11,774 previously). ​​​​
  • The expenses should be claimed in the year the adoption process ends. ​​
  • You can split the $15,000 limit between you and your spouse or common-law partner, which can make sense if you’re both in high tax brackets.​

Tax Savings StrategiesChildren’s fitness amount

If you’ve paid fees for your child to participate in a prescribed program of physical activity, you can now claim up to $1,000 of those fees (up from $500 last year), which will provide tax savings in the form of a non-refundable credit.​​​

Tax Savings StrategiesAutomobile Expenses

The rules surrounding motor vehicle expenditures in relation to rental property operations can be confusing, particularly when an investor owns only one rental property. You can only deduct “reasonable” motor vehicle expenses if you meet all of the following conditions;​​

  • you receive income from only one rental property that is in the general area where you live;​​
  • you personally do part, or all, of the necessary repairs and maintenance on the property; and​​
  • you have motor vehicle expenses to transport tools and materials to the rental property​

The Canada Revenue Agency (CRA) voluntary disclosures programThe Canada Revenue Agency (CRA) voluntary disclosures program ​

Allows taxpayers to ‘fess up about something on their current or past tax returns that may not pass the smell test. Doing this can prevent additional penalties from being assessed. But for the disclosure to be accepted, you must contact the Canada Revenue Agency (CRA) before it contacts you.​​

Tax Savings StrategiesDon’t have to pay for tax software to use the NETFILE service ​

The Canada Revenue Agency lists several online programs that are 100% free and certified to work properly with its systems (see cra-arc.gc.ca).

Tax Savings StrategiesTax efficiency

Should never be the main reason for buying an investment or real estate. Start with the right asset mix for your risk tolerance and investing goals, then look for tax efficiency.​

Loan and mortgage lossesLoan and Mortgage losses

If you invest money in loans and mortgages for a living, you may be able to write off your losses as a business expense.​​

Tax Savings StrategiesInvest in your kid’s names

  • Let’s say you give your 5-year-old $100,000 and she uses it to buy shares of a bank stock in her name. By the time she’s 18, those shares could be worth $200,000. She could then cash in $20,000 worth of stock a year, and pay the capital gains taxes on that growth at her own much lower rate.​​

  • Treasure hunt equipment: Claim your metal detector—searching for buried treasure is a business venture.​​

  • Baby sitting: Write off your child-care expenses for a night out if you’re at work, school or entertaining clients.​​

  • Self-employed : Save BIG when you sell :The government likes to encourage small business, so they’re willing to give you a one-time $800,000 capital gains exemption when you sell.​

Tax Savings StrategiesNEVER do this!

Many self-employed people pay their kids or spouse to do some work for the family business as a way of splitting income and reducing the family’s overall tax bill. But don’t get greedy and pay your 16-year-old $50,000 a year. You’re just asking for an audit.​

Tax Savings StrategiesSupercharge your charitable giving

If you’re one of those commendable people who plans on leaving the bulk of your estate to charity when you pass on, we have good news. You can reduce your tax bill substantially—and leave more to your charities of choice—by donating stock rather than cash while you’re still alive. That’s because when you donate stock, you’ll still get the same tax credit you’d get if you donated cash, but you don’t have to pay any capital gains​.

Tax Savings StrategiesSpread your wealth around before you die

  •  A simple tactic for avoiding probate fees on your estate is to slowly move money into TFSAs or regular taxable accounts to avoid a massive tax hit on your final return. You can also set up trusts for your children and grandchildren to average in taxable income at potentially lower marginal tax rates. That, or name your heirs as beneficiaries on accounts or give money to them while you’re alive to avoid probate fees.​​

  •  If neither you nor your spouse has donated to charity since 2007, you can claim the first-time donor super-credit, and get an extra 25%. It’s available only until 2017, the donation must be in cash and only the first $1,000 qualifies.​

Tax Savings StrategiesGolf Club Fees and Membership Dues​

There is NO Income Tax Deduction.​

Tax Savings StrategiesVolunteer tax savings​

If you’re an emergency services volunteer you might qualify to claim a $3,000 amount on lines 362 (volunteer firefighters) or 395 (search and rescue volunteers, which is new for 2014). Alternatively, you can claim an exemption for up to $1,000 of income paid to you as an emergency services volunteer. But you can’t claim both the $3,000 amount and the $1,000 exemption. You’ll likely be better off claiming the $3,000 amount; a tax pro or tax software can help you make that decision.​

We are also Canadian private hard money lenders. We can offer you multiple solutions to resolve any situation.We can also do short term small private mortgage if required.

We can HELP!!! We also BUY HOUSES. Please call:

Contact Information

P.S. Success isn’t a matter of chance, it’s a matter of choice. So it’s up to you to make the right choice to become successful. If you don’t know what to do it starts with making the choice to register for this LIVE real estate investors training in your town now and making sure you make the right choice to SHOW UP!!! Learn more to earn more!

Are you a Canadian real estate Investor? Join Canada’s largest real estate investors club now.

Use RRSP, TFSA, RRIF and RDSP plans to Save Taxes

Tax saving Tips with RRSP, RESP, RDSP, ​TFSA and others​

Tax SheltersRRSPs and TFSAs are amazing tax shelters that can help you hold onto thousands of dollars of your hard-earned money every year. The RRSP lets you defer paying taxes on a portion of your yearly income until you retire in a lower tax bracket—which will be true for most people.​

Tax SheltersMaximize your RRSP or TFSA contribution limits. Keep in mind that the investment interest you get from bonds and GICs is taxed at a higher rate, so in general, put your fixed-income investments in the tax shelter, and keep your stocks and dividend payers outside.

Tax SheltersTax Reduction Tips with RRSP, RESP, RDSP, ​TFSA and others​

Make contributions to it in the name of your lower-earning partner. You’ll get the same advantage as if you were putting income into your own RRSP (a tax refund on contributions), but here’s the kicker: when the money is later withdrawn, it will be taxed in your lower-income spouse’s hands at a lower rate. ​​

  • Just be aware of the Canada Revenue Agency’s attribution rules: you can’t make a contribution in the same year you withdraw the money, or in either of the two previous tax years. ​​

Plus, the total combined contributions to your own RRSP and your spouse’s RRSP cannot exceed your own deduction limit.​

Tax SheltersMax your RRSP

  • Registered retirement savings plans (RRSPs) are the government’s weak apology for gouging citizens on their taxes.
  • You may as well use the bone they throw you and get the most out of this chance.
  • When speaking about borrowing to buy investments, maxing out your RRSP is usually a sensible decision provided that
    you are able to service the loan in a reasonable period of time.

Tax SheltersKeep contributing to TFSAs well past 71

And unlike RRIFs, there are no forced annual withdrawals.

Each member of a senior couple can invest $5,500 into his or her TFSA annually, meaning the two of you can convert $11,000 worth of RRIF withdrawals and non-registered savings into TFSAs each year.

Use RRSP, TFSA,RRIF & RDSP plans to Save TaxesRegistered Disability Savings Plan (RDSP)

For eligible Canadians, money placed in a Registered Disability Savings Plan (RDSP) grows tax-free and can net a staggering 300% return.

Tax SheltersEarn free tuition money

What would you say if someone offered a 20% return on every dollar you squirrelled away for your kid’s university tuition?

Well, setting up a Registered Education Savings Plan lets you do exactly that: with an RESP, the first $36,000 you contribute is eligible for the 20% Canada Education Savings Grant (CESG).

We are also Canadian private hard money lenders. We can offer you multiple solutions to resolve any situation.We can also do short term small private mortgage if required.

We can HELP!!! We also BUY HOUSES. Please call:

Contact Information

P.S. Success isn’t a matter of chance, it’s a matter of choice. So it’s up to you to make the right choice to become successful. If you don’t know what to do it starts with making the choice to register for this LIVE real estate investors training in your town now and making sure you make the right choice to SHOW UP!!! Learn more to earn more!

Are you a Canadian real estate Investor? Join Canada’s largest real estate investors club now.​

Ontario seniors get $10K Tax Credit

Toronto-Ontario-Canada

Finally Liberals have delivered what they promise.Tax credit for seniors in Ontario for renovating their home. Ontario Legislature passed the bill by vote of 68 to 36.

It was a promise Premier Dalton McGuinty made a year ago during the last election campaign. Navtaj Chandhoke, founder of Professional Real Estate Investors Group (PREIG) Canada said, “The credit is up to $10,000.00 in eligible home renovations or 15% up to $1,500 each year” wheelchair ramps, elevators, non-slip bathroom flooring, hands-free taps, automatic garage door owners and motion-activated lighting qualify for this tax credit including grab bars, walk-in bathtubs, Healthy Homes Renovation Tax Credit does not cover the services of Services  home security,housekeeping, regular house repairs and wheelchairs/walkers.  Navtaj Chandhoke, founder of Professional Real Estate Investors Group (PREIG) Canada says: “It can be claimed by Ontario senior homeowners, tenants and people who share a home with a relative who’s a Ontario senior.”

This program can offset the cost to Canadian Real Estate Investors who have seniors as their tenant.

Tax Credit

This new tax credit will also help achieve the goals of our Action Plan for Health Care by keeping our loved ones out of hospitals and long-term care, and at home, where they want to be,” Health Minister Deb Matthews says in a press release.

There is no income cut off. Ontario seniors don’t need to submit receipts, although they should be kept in case Canada Revenue Agency (CRA) demands proof of expenses.

This is another tax credit available senior homeowners, tenants and people who share a home with a relative who’s a senior.

WorldWealthBuilders.com have a list of Canadian grants, tax credits and rebates for Real Estate. Canadian Real Estate investors can take advantage of these programs for their Canadian Real Estate investments catering seniors who are tenants in their properties.

World Wealth Builders conveys action-orientated Real Estate education, coaching and mentoring for Canadian Real Estate investments since 1993 World Wealth Builders have been providing Canadian Real Estate wealth creating secrets, innovative strategies and step-by-step practical how-to methods through dynamic hands-on apprenticeships for Canadian investors.

Navtaj Chandhoke is a Canadian-based real estate investor, speaker, author, educator and the founder of World Wealth Builders and Professional Real Estate Investors Group (PREIG) Canada, the leading REI Club providing Canadian investors education, mentoring, support and network.