David - What can I deduct for my rental house in Toronto = I live
in Orlando Florida.
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david ingram replies
Well, for Canada you have to fill in form T776. If it is shown
as a deduction on the form, you can claim it. You can also go to
www.centa.com and click on the "Tax Guide" button in the top left
box and then click on the rental section for some more good
ideas. For the US, you have to fill in Schedule E and if it is
on there it is deductible.
However, two years ago, the editor of Western Investing in Canada
asked me for the seven deadly mistakes of landlording.
I don;t feel so bad about the reference to my own $4.8 million
tax court loss after hearing that H & R Block was just
re-assessed for $34,000,000 on their own tax return for 2004.
I did NOT wake Frank up at 4 AM for permission to reproduce this
but I am sure he would approve.
---------------
Seven deadly mistakes of landlording
By: Frank O'Brien
In the largest personal tax ruling ever in Canada, tax consultant
and landlord David Ingram of West Vancouver was nailed with a
$4.8 million judgement last year after losing a long tax battle
with Canada Customs and Revenue Agency.
Ingram, who has owned 3,000 rental apartments and is still
revered by legions of clients across Canada and the United
States, reveals here the seven deadly mistakes that landlords
should never make.
According to Ingram, as told to Western Investor and recapped
here with permission of the editor, these are the heavy seven:
1. Not claiming all the interest. If you borrow money from any
source, especially high-interest-rate charge cards, to cover
taxes and other landlord expenses, make sure you deduct the
interest paid in your tax return.
2. Not using the rental property to make your own mortgage
interest deductible. Rental income can be used to pay down your
own non-deductible mortgage. Then you can use the increased
equity in your house to open a credit line to pay the deductible
expenses on the rental property. Voila, you have converted
non-deductible debt to deductible debt.
3. Not borrowing money when you should. Take the cash money from
the rent and put it into a term deposit for a year or two.
Whenever you need money for the rental house, borrow it on a line
of credit. After two years of saving $1,200 a month rent, you
will have that $30,000 cash to pay for the boat you always wanted
and no interest to pay that isn't deductible.
4. Keeping a separate bank account. This is a really hard one to
get across, according to Ingram, because it goes against general
advice, but there is no real need for a separate bank account. In
fact, it usually works against you because you tend to deposit
all the rents into that account and use that money to pay for the
rental expenses first. Use the rents to buy your food, pay for
your car, or take a vacation when you are short. Then borrow the
money for the rental expenses. The interest on the loan is
tax-deductible.
5. Not keeping tax receipts. Get an old case and fill it with
envelopes. Label each envelope with a topic: Advertising,
accounting, repairs and maintenance, mortgage interest, second
mortgage interest, taxes, utilities, car, etc. At the end of the
year, open the envelope and add up all the bills. Staple the
calculator tape to the bills, write down the amount on the
outside of the envelope and put the receipts back into the
envelope. Put the case in a safe location.
6. Not screening tenants. Landlords will turn a $500,000 property
over to a complete stranger because they like their looks. That
is why so many rented expensive homes are found with marijuana
grow ops in them. No matter what they look like, do not turn your
property over to a tenant without having them vetted first. Two
good sources of tenant information can be found by contacting ex
TVS Tenant Verification Service Inc. at 1(877) 974-9328 or on the
Web at www.tenantverification.com, or TenantCheck Credit Services
at (604) 460-0838, also at www.TenantCheck.ca.
7. Not inspecting the property on a regular basis. Be a caring
landlord for the first six months, particularly if it is a
detached house. Each province has different rules for inspection.
Find out what yours are and make it a point of giving notice to
inspect once a month or once every six weeks for the fist six
months and let the prospective tenant know that you are going to
do so. It will, by itself, weed out the undesirables.
David Ingram is the president of West Vancouver-based Centa Real
Estate Realty Group. He can be reached at (604) 980-0321 or
e-mail at taxman at centa.com.
Frank O'Brien can be reached at fobrien at dccnet.com.
Copyright 2004 Inman News
------------------------------
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa
Specialists
US / Canada Real Estate Specialists
Home office at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 10 PM 7 days a week (please do not
fax or phone outside of those hours as this is a home office)
email to taxman at centa.com
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed
information or consultation and is to be regarded only as general
comment. Nothing in this message is or should be construed as
advice in any particular circumstances. No contract exists
between the reader and the author and any and all non-contractual
duties are expressly denied. All readers should obtain formal
advice from a competent and appropriately qualified legal
practitioner or tax specialist for expert help, assistance,
preparation, or consultation in connection with personal or
business affairs such as at www.centa.com. If you forward this
message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
David Ingram specializes in giving expert income tax and
immigration help to American and Canadian citizens living out of
their home countries from Zimbabwe to Saudi Arabia to Mexico to
China or Chile - Cross border, Non-resident - dual citizen - out
of country investments are all handled with competence and
authority.
This from "ask an income tax and immigration expert" from
www.centa.com or www.jurock.com or www.featureweb.com. David
Ingram deals on a daily basis with expatriate tax returns with:
multi jurisdictional cross and trans border expatriate problems
for the United States, Canada, Mexico, Great Britain, United
Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan,
China, New Zealand, France, Germany, Spain, Italy, Russia,
Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland,
Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India,
Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba,
Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands,
US, UK, GB, and any of the 43 states with state tax returns, etc.
Rockwall, Dallas, San Antonio Houston
Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and
Immigration Tips, Income Tax Immigration Wizard Antarctica
Rwanda Guru Consultant Specialist Section 216(4) 216(1) NR6 NR-6
NR 6 Non-Resident Real Estate tax specialist expert preparer
expatriate anti money laundering money seasoning FINTRAC E677
E667 105 106 TDF-90 Reporting $10,000 cross border transactions
Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US
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California, Colorado, Connecticut,
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and Dallas Houston Rockwall Garland
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wizard - consultant - expert - advisor -advisors consultants -
gurus - Paris Prague Moscow Berlin
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Beijing,
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Deer, Olds,
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Davidson,
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David Ingram expert income tax help and preparation of US Canada
Mexico non-resident and cross border returns with rental dividend
wages self-employed and royalty foreign tax credits
international non-resident cross border income tax help
assistance expert preparation & immigration consultant david
ingram, experts on rentals mutual funds RRSP RESP IRA 401(K) &
divorce preparer preparers consultants
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