Claiming Rental Income

[stealth]

Now lets say I do not claim rental income. Is there a way for the gov't to find out, considering I do not have it as my primary residence, and the people pay me in cash/cheque?

Also if I do claim it, am I taxed at the same rate as regular income tax?

Does it matter that the rent doesn't even cover my monthly mortgage cost?

[msouther]

I would highly recommend claiming the income because if you get busted, the repercussions would far worse. You can also deduct any expenses you incur with the property including mortgage interest, any other interest paid (ex: if you borrowed money on LOC for down payment on it). You can also deduct taxes, utilities if you pay them, maintenance costs etc.

You are able to claim deductions against that income up to the amount you earned, but you cannot create a loss by claiming excessive decuctions. If at the end of the year you still have more income than expenses, you can also depreciate the property.

For the record, I have rental properties and this information is based on someone who is familiar with this scenario. I am by no means an accountant, nore do I pretend to be one. Consult your accountant for accurate, government of Canada info.

[masoncgy]

It's not hard for the government to pick up on the missing income. You own more than one property, it's all documented on paper... it will eventually come back to haunt you.

If you are not getting enough income from the monthly rent to cover all of your expenses, you are not going to be facing any significant tax implications anyway... so I wouldn't worry about it.

Claim all of your expenses (including interest) against the income and report it.

[Xtrema]

Don't skip it. And if you still have a mortgage, interest paid can be written off as expense along with taxes and maintenance.

So in the end, unless you own the place out right or have a very high % of equity in the property, there isn't much added to your income anyway.

[skandalouz_08]

Yeah claim it. I had a rental property with rental income that wasn't even covering my mortgage payment. Because of this I ended up with a negative net income from the rental property once all the deductions took place. It won't hurt you much, if at all to claim it.

[UndrgroundRider]

I know two different people who got caught doing exactly this. I don't know the full repercussions, but it wasn't good. Both times it was the tenants who tipped off the CRA after they were kicked out/rent raised.


In the grand scheme of things, how much money could you realistically save? Even assuming the whole place is paid off, and you're charging 1500/month, you'd be saving maybe 5 grand a year. Sure that's significant, but is it really worth breaking the law over? Tax avoidance does carry the possibility of jail time.

And if you own that second property anyway you're way ahead of the game. Do you really need to cheat your way into that extra 5 grand?

[G]

Originally posted by UndrgroundRider
I know two different people who got caught doing exactly this. I don't know the full repercussions, but it wasn't good. Both times it was the tenants who tipped off the CRA after they were kicked out/rent raised.


In the grand scheme of things, how much money could you realistically save? Even assuming the whole place is paid off, and you're charging 1500/month, you'd be saving maybe 5 grand a year. Sure that's significant, but is it really worth breaking the law over? Tax avoidance does carry the possibility of jail time.

And if you own that second property anyway you're way ahead of the game. Do you really need to cheat your way into that extra 5 grand?

Totally agree. I report my rental income.

[kenny]

Originally posted by stealth
Does it matter that the rent doesn't even cover my monthly mortgage cost?

Claim it, you will not be paying any taxes on it anyway since your mortgage interest + other costs of operating this rental property (condo fees? property taxes? etc) are greater than the monthly rental income.

[stealth]

Thanks for the info guys.

Yea I have condo fees, and property taxes that will make it even more than the rent that I am charging.


The last thing I want to do is get in trouble with taxes, and it seems they are keeping a close eye on any mistakes I make...