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We are pleased to provide a variety of resources on accounting, taxation, and other related subjects that we think you will find helpful to both individuals and businesses. Browse through the Quick Tools resource menu then, if you have a question that isn’t answered, we can help to clarify your situation. Simply contact us by email or give us a call at 778-792-3282. We would be happy to meet with you for a free, no-obligation consultation to discuss your unique situation.

Renting Out Part of your Home: The New Rules

Hello everyone, in today’s market of record high real estate prices many home owners are electing to rent out a portion of their homes. Whether this is to lessen the financial burden of their mortgages, place an alternative revenue stream in savings, supplement their income, or all of the above, the practice is extremely common. 

Unfortunately, the recent changes to principle resident rules have effected the rules regarding renting a portion of a home. Currently, if you change part of your home into a rental or business operation you are deemed to have sold (as far as taxation is concerned) it at a fair market value and to have reacquired it at the same amount. Furthermore, any income or loss generated by the change must be reported in the year the change occurs.

This means for homeowners who rent out part of their home that any income realized through renting part of the property in years after the change of use must be reported and will be taxable upon the sale of property. Interestingly enough, it is possible to seek exemption for the change of use rules if no structural change to the property is made to make it more suitable for rental or business or if the rental or business area is very small. These exemptions fall entirely to the discretion of the CRA and what they consider to be “reasonable.”

With these changes and more likely to follow, it is more important than ever to have an experienced tax representative at your disposal.

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Sale of Principle Residence

Hello Everyone, today I would like to inform you of an update regarding the sale of one’s principle residence. As you may already be aware, the sale of one’s principle residence in Canada is exempt from capital gain tax, because of this there generally hasn't been a reason to report the sale, but the rules have changed for the 2016 return and onward.

While the sale of one’s principle residence does remain free of capital gain tax for the years it was designated as the owner’s principle residence, the transaction is now required be to reported under the Capital Gains section of the T1 Income Tax and Benefit Return. Late designations of a property as a principle residence can be adjusted with a penalty of $100 per month (to a maximum of $8000). A principal residence does not have to be the house where the owner resides all the time, indeed according the CRA the property may qualify as a principle residence if the owner, the owner’s children, or the owner’s spouse reside there at some point during the year, although this can change if the property is rented out. It is also important to remember that an owner and spouse may only have one principle residence between them, this principle residence may even be outside of Canada. The above change also apply in the disposition of property even though the property has not actually been sold in such a case. 

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