Generally, we like to claim the capital cost allowance (CCA) - the tax equivalent to depreciation - on our properties. This decreases our current year taxes even if we will incur "recapture" when we ultimately sell the property.
After all, a dollar today is worth more than a dollar tomorrow. However, if you can claim the principal residence exemption, thus shielding a gain from taxes for at least a portion of the ownership period, you generally don't claim the CCA because CCA prohibits you from using the principal residence exemption.
Keep in mind that the principal residence exemption may still be available to you if you have a rental property and later move into it, or alternatively have a personal house and subsequently rent it out.
If changing the use of the property in the year, ensure that you are aware of the tax implications and determine whether you need to file a tax election to preserve your right to defer or reduce taxes.
7) Claim income from spousal loans
Claim any income from interest you received from your spouse from a spousal loan program, which is used to split income and thus save taxes between spouses.
8) File the tax shelter loss or deduction form
If you invest in a tax shelter, file a T5004 "Claim for Tax Shelter Loss or Deduction" to preserve your right to the benefits of the shelter.
9) Declare all your income slips
Missing one income slip won't be the end of the world, but making the same mistake in subsequent years can result in federal penalties of 10% of the unreported amounts with potentially corresponding provincial penalties.
Forgetting a $5 interest amount from a T5 slip one year could result in huge fines in the following year if you miss a $3,000 one or higher.
10 Non-deductible costs
Just because something is not tax-deductible does not mean it simply fades into the tax black hole and is therefore "dead money."
You need to bear in mind that any work done on a property that is capital in nature may still attract some tax perks. If the thing acquired is a freestanding functional unit, it may be classified as a depreciating asset on which you may claim a depreciation deduction.
If the thing acquired is affixed to the building, it may constitute "construction expenditure" on which you may claim a building allowance deduction.
If worse comes to worst and the expenditure does not fall under either of these categories, it may still be included in the cost base of the property, which may reduce the future capital gains tax payable if the property is sold.
Be pedantic with any cost you incurred on the property. Save every bit of paperwork (e.g., receipts, invoices) because chances are it may reduce your tax in one way or another.
To get the rest of our top 50 tax tips, pick up a copy of our April issue, on newsstands now.
Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate
Investment Hot Spots:
Baie-James, Carlisle, Arnold's Cove, Gladwyn, Irvine
6) Claim CCA or the principal residence exemption