Hey everyone, I’m considering renting out my house while I take a job in another city. The thing is, the rental income at market rate won’t cover my mortgage interest and property taxes. I’m okay with covering the difference, but I’m not sure how CRA treats this loss. Does anyone have experience with this? Also, I’m planning some upgrades while it’s rented. Any advice would be appreciated!
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As a landlord, it’s important to understand that only the interest portion of your mortgage payments can be deducted as an expense, not the payments towards the principal. This might affect whether you actually have a loss or not. If you do have a loss, it would decrease your gross income.
Keep in mind that if you convert your primary residence to a rental property, you’ll owe capital gains tax on the value increase between when you converted it and when you eventually sell it. It’s definitely worth consulting with an accountant to get a clear picture of your situation.
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As a landlord myself, I can tell you that renting out at a loss isn’t ideal. Have you considered raising the rent to cover your costs?
Thanks for the advice! I hadn’t considered the capital gains tax aspect. And no, I haven’t thought about raising the rent above market rate - I want to be fair to potential tenants.
Regarding the upgrades you’re planning, be aware that renovations on a tenanted unit need to meet specific criteria in Ontario. If they don’t, the tenant can request a rent abatement for interference with their reasonable enjoyment of the unit. You might want to consider doing any major work while the unit is vacant to avoid potential issues.
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As a tenant, I appreciate landlords who keep rent at market rate instead of trying to maximize profits. It’s refreshing to see someone considering fairness.
Have you looked into the tax implications of renting out your property? You might be able to deduct some expenses like property management fees, insurance, and maintenance costs.
That’s a good point about deductions. You can indeed deduct various expenses related to your rental property. This includes property taxes, insurance, utilities (if you’re paying them), maintenance and repair costs, and even travel expenses if you’re managing the property from another city. Keep meticulous records of all these expenses. It’s also worth noting that you can deduct depreciation on the property, which is called Capital Cost Allowance (CCA) in Canada. However, claiming CCA can have implications when you sell the property, so it’s best to discuss this with an accountant.
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Wow, I didn’t realize there were so many potential deductions. This is really helpful information. I’ll definitely need to talk to an accountant to make sure I’m doing everything correctly. Thanks!
just dont be a slumlord and youll be fine lol
While it’s admirable that you’re considering fairness to tenants, it’s also important to ensure that you’re not putting yourself in a difficult financial position. Consider creating a detailed budget that includes all potential income and expenses related to the property. This should include not just mortgage and taxes, but also potential vacancy periods, maintenance costs, and an emergency fund for unexpected repairs. If after all this, you’re still running at a loss, you might want to reconsider whether renting out is the best option for you right now. Remember, being a good landlord also means being financially stable enough to properly maintain the property and respond to tenant needs.
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