My question is: Canadian-specific
QUESTION: My parents are looking at purchasing in the Okanagan.
They have a condo paid for in Abbotsford worth
approximately 220 000. What they would like in the
Okanagan is out of their price range, and they don't want
to assume more debt..
I own a house in Abbotsford, worth approx. 440,000 with
300k in equity..
If I took an equity line to help them purchase their new
property could I make the interest and equity payments
tax deductible, eg...100,000 equity loan at 550$ a
month/6k per year in payments.. Roughly what percent
could I expect as a tax return, I make 74 000 a year..?
Does this sound like a feasible option which would
accomodate their needs and allow them to purchase a
freehold property rather than a modular home....I think
this would help keep their equity and act as an investment
vehicle for me upon sale.. Am I correct....
Thanks...
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david ingram replies:
An admirable deed but not tax deductible.
Interest on a capital asset, (vacant land, gold, non-dividend bearing stock, a summer cottage, your parent's house, etc. is NOT deductible on a year to year basis although it can sometimes be added to the ACB (adjusted Cost Base) of the asset for capital gains purposes. (not always - just sometimes - NEVER for gold, silver, summer cabin, etc - sometimes for vacant land).
If you had other investments like a mutual fund, etc, you could cash in the mutual fund, pay for the property in the Okanagan and then borrow money on your house to buy back the mutual fund and the interest would be deductible but interest on an investment in your parent's house just does not make it.
Goto www.centa.com and read the November 2001 newsletter in the top left hand corner for more info. Buying and reading Fraser Smith's book, the Smith Manouvre wouold also help you understand the process.
Fred Snyder - host of 'ITS YOUR MONEY' every Sunday from 9:00 AM to 10:30 AM on CHBD 600AM also gives free seminars at noon and 7 PM at his Vancouver office at `1764 West 7th'. Call (604) 731-8900 to reserve a seat,.
david ingram replies:
An admirable deed but not tax deductible.
Interest on a capital asset, (vacant land, gold, non-dividend bearing stock, a summer cottage, your parent's house, etc. is NOT deductible on a year to year basis although it can sometimes be added to the ACB (adjusted Cost Base) of the asset for capital gains purposes. (not always - just sometimes - NEVER for gold, silver, summer cabin, etc - sometimes for vacant land).
If you had other investments like a mutual fund, etc, you could cash in the mutual fund, pay for the property in the Okanagan and then borrow money on your house to buy back the mutual fund and the interest would be deductible but interest on an investment in your parent's house just does not make it.
Goto www.centa.com and read the November 2001 newsletter in the top left hand corner for more info. Buying and reading Fraser Smith's book, the Smith Manouvre wouold also help you understand the process.
Fred Snyder - host of 'ITS YOUR MONEY' every Sunday from 9:00 AM to 10:30 AM on CHBD 600AM also gives free seminars at noon and 7 PM at his Vancouver office at `1764 West 7th'. Call (604) 731-8900 to reserve a seat,.
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This is not intended to be definitive but in
general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only - no self employment or rentals
or capital gains - you did not move into or out of the country in this
year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no
rental
$1,200 would be the minimum with a move in or out
of the country. These are complicated because of the back and forth foreign tax
credits. - The IRS says a foreign tax credit takes 1 hour and 53
minutes.
$1,500 would be the minimum with a rental or two in
the country you do not live in or a rental and a business and foreign tax
credits no move in or out
$1,600 would be for two people with income from two countries
$2,800 would be all of the above and you moved in
and out of the country.
This is just a guideline for US / Canadian
returns
We will still prepare Canadian only (lives in
Canada, no US connection period) with two or three slips and no capital
gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely
$450
And an American only (lives in the US with no
Canadian income or filing period) with about the same things in the same range
with a little bit more if there is a state return.
Moving in or out of the country or part year
earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00
each.
18 RRSPs would be $900.00 - (maybe amalgamate a
couple)
Capital gains *sales) are likely $50.00 for
the first and $20.00 each after that.
Just a guideline not etched in
stone.
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