Following are Top 10 Tax Savings Tips for Canadian Real Estate Investors:
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Don’t exaggerate your home office expenses. This is a red flag for the CRA. There are always exceptions, but a good rule of thumb is a maximum of 25 per cent as the business share of heat, hydro, property taxes and so on.
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Keep a careful log of car expenses. This is another red flag for CRA.
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If you run into trouble or make a mistake, call the CRA. Most times they will be very helpful, especially if you call before the crunch.
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Whatever you do, don’t ignore communications from the CRA, respond promptly and make notes of your conversation right on the letter for future reference.
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Unless you are incorporated you are required to complete a Statement of Business and Professional Activities (T2125) at he same time as you file your personal taxes.
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Don’t wait until the last minute. It’s impossible to get yourself properly organized under eleventh-hour time pressure and it’s difficult to make good decisions to minimize your taxes.
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Make an estimate of your expected tax bill. If your revenue is going to be high, you might consider making that machinery or computer purchase before year’s end. You’ll defray some of the expense through capital cost depreciation, says Cleo Hamel, senior tax analyst with H & R Block Canada.
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You should set aside 30 to 40 per cent of your gross income to cover income tax and CPP. Even if you are the only employee of your business, you are responsible for paying the employee and the employer CPP contributions.
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Keep proper records differentiating business from personal. If you can’t prove it, the CRA will likely assume the expense is personal. Hamel recommends that you slot your expenses into the categories provided by CRA on the T2125. “Whatever you do, don’t have a large
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