Rental Income Taxed

Rental income tax

How is rental income taxed?

 How is Rental Income Taxed in Canada?

The real estate market in Toronto and the suburbs has been booming over the last several years because of the favorable economic conditions and the low interest rates. Individuals have invested in rental properties of all sorts. Rental income is generated when you rent a property you own. Rental income could be generated from a house, apartment, or a commercial building. The rental property may be acquired in your personal name, in a partnership, in a trust or a corporation. Depending on who owns the property, the tax consequences are very different.

Rental Income Taxed– personal name

If the rental property is owned in your personal name, this income is taxed on your T1 personal income tax return. The tax you pay will depend on your marginal tax rate.

 Rental Income Taxed –  partnership

The partnership’s rental income is  attributed to the partners, who must include their respective share of it in their personal income.

Rental Income Taxed – corporation

If a renal property is held in a corporation there are multiple factors that have to be considered in determining the tax rate. The General Corporate Rate is 38% Federal and 11.50% Provincial (Ontario). Therefore we have a combined General Corporate Rate of  49.50%. However, not all corporations pay this rate because there are tax breaks offered by the federal and provincial governments. The federal government offers a 10% abatement which brings the tax rate down by 10% to 28%. We also have the Small Business Deduction of 17% and the General rate reduction of 13%. To receive preferred tax rates, the corporation has to meet certain conditions.

Brampton Tax Accountants

Tax Accountant

Tax Accountant

Cheema & Assocaite – Your Local Brampton Tax Accountants 

Cheema & Associate CPA Professional Corporation is an accounting firm located in Brampton, Ontario at the main intersection of Kennedy Rd S and Clarence St. Our office address is 143 Clarence st. Suite 5, Brampton ON L6W 1T2.

We provide income tax services to all types of clients from Brampton. We have been serving the Brampton market for over three years. Tax has evolved over the years with strict regulations imposed by the Canada Revenue Agency. We can professionally prepare your tax returns while maximizing your refund by designing and catering unique tax planning strategies. Our professionals have experience in handling wide rage of unique tax returns. Contact us for your 2014 personal income tax returns.

Our Brampton tax accountants are dedicated in assisting you in all your income tax needs.

Personal Income Tax
Personal tax has evolved over the years with strict regulations imposed by the Canada Revenue Agency. Your local Brampton tax accountants can professionally prepare your tax return while maximizing your refund by designing and catering unique tax planning strategies. Our professionals have experience in handling wide rage of unique tax returns.

Corporate Tax
Our uniquely designed tax programs can assist you with complying with the complicated provisions of the Income Tax Act (ITA) while minimizing tax liabilities. We can structure your business to maximize profitability and minimize tax risks.Contact us for your 2014 corporate tax returns.

Audit & Appeal
Our team is dedicated to assist you in all your CRA appeals. We make sure that your company’s tax audit is handled smoothly and efficiently. We can assist you with the tax audit process – starting from the information gathering stage to negotiation with the tax authorities. We can also help in negotiating payments and even apply for interest or penalty relief.

Voluntary Disclosures – Should I Apply?

 

Should I use the VDP program offered by the CRA? Is this program right for me?

Should I use the VDP program offered by the CRA? Is this program right for me?

What is Voluntary Disclosures Program (VDP)?

The VDP is a Canada Revenue Agency (CRA) administered program which allows taxpayers to disclose or amend historical tax returns due to inaccuracy or unreported tax information. Under the program the CRA will not charge penalties or prosecute the taxpayer. The program also promises to grant partial interest relief if you are accepted under the program.

A disclosure must meet the following four conditions in order to qualify as a valid disclosure:

  1. Voluntary – The disclosure has to be voluntary. You cannot apply for this program once the CRA starts to audit your books and records. You will not qualify for this program once the CRA contacts you.
  2. Complete – The taxpayer must provide complete and accurate information for the period you are applying for.
  3. Penalty – There has to be situation where a penalty would apply to the taxpayer. This usually constitutes that there is taxes owing, otherwise the use of this program would be useless.
  4. One year past due – The disclosure has to be one year past due.

Should I Apply?

After briefly reviewing the details of the VDP program everything looks great on the surface. It had finally seemed like the CRA had implemented a program which would allow Canadians to correct past period errors without hefty penalties and interest.

Before we can fully start utilizing the program there are ambiguities that the taxpayer must understand. One of the most common misconceptions is that the CRA will not charge penalties or interest if you make a submission under this program.

In the VDP publication the CRA states that if the CRA accepts a disclosure as having met the conditions set out in this policy, it will be considered a valid disclosure and the taxpayer will not be charged penalties or prosecuted with respect to the disclosure. However, the CRA  contradicts itself and states that the Minister does not have to grant relief under the VDP provisions. Each request will be reviewed and decided on its own merit. If relief is denied or partly granted, the CRA will provide the taxpayer with an explanation of the reasons and factors for the decision.

When determining if interest and penalties should be charged, the CRA will assess on a case by case basis. This decision is most likely made by the CRA agent assessing the case.

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Canadian Tax Deadlines 2013-2014

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Important dates for Individuals
Tax return filing due dates
Employees file –> 2014 personal tax return is due April 30, 2015
Self-employed –> If you or your spouse carried on a business the 2013 personal tax return is due June 15, 2015. (If you have tax owing the payment still has to be made by April 30th)
Deceased persons –> The legal representative of the estate of an individual who dies in 2012, will have to file a tax return. The due date depends on the date of death and if the individual carried on a business.
Balance owing due dates
Your balance owing is due no later than April 30, 2013. When a due date falls on a Saturday, a Sunday, or a holiday recognized by the CRA, we consider your payment to be made on time if we receive it or it is postmarked on the next business day.
Installment payments due dates
Your installment payments for 2013 are due March 15, June 15, September 15, and December 15, 2013.
When a due date falls on a Saturday, a Sunday, or a holiday recognized by the CRA, we consider
your payment to be paid on time if we receive it or if it is postmarked on the next business day.
Your payment will be considered paid on one of the following dates:
  • Payments you make in person at your financial institution are considered paid on the date stamped on your INNS3 receipt.
  • Payments you send by mail are considered paid on the date you mail them.
  • Payments you make through your financial institution’s Internet or telephone banking services are considered paid when your financial institution credits us with your payment.
  • Post-dated cheques and payments you make by pre-authorized debit are considered paid on the negotiable date

Who is Required to File a Tax Return?

 Individuals must file a tax return if any of the following apply
 

 

Individuals must file a tax return if any of the following apply:
  • Taxpayer has taxes owning or wants to claim a refund
  • Taxpayer and their spouse or common-law partner elected to split pension income
  • Taxpayer received working income tax benefit (WITB) advance payments or wants to claim WITB
  • Taxpayer disposed of capital property or realized a taxable capital gain/taxable capital loss
  • Taxpayer has to repay old age security or employment insurance benefits
  • Taxpayer has not repaid all amounts withdrawn from your registered retirement savings plan (RRSP) under the Home Buyers’ Plan or the Lifelong Learning Plan
  • Taxpayer want to apply for the GST/HST credit
  • Taxpayer or spouse or common-law partner want to begin or continue receiving Canada child tax
  • benefit payments, including related provincial or territorial benefit payments. Read more