There are numerous tax benefits to investing in Toronto real estate, and these benefits are a big reason many investors choose to diversify their portfolio by purchasing single- or multi-family rental properties.
Below we’ll review three tax implications and benefits of investing in real estate in GTA. As always, to get the best advice for your situation, be sure you speak with a tax accountant.
Tax Benefits of Investing in Toronto Real Estate
1-Tax deductions:
Investment property owners in Toronto can write off many expenses related to the operation, management, and maintenance of their property. Business investors can also take advantage of deductions for things like office space, advertising expenses, and other qualified operational expenditures related to their investment property.
The following is a list of expenses that are deductible:
- Advertising
- Insurance
- Interest and bank charges
- Office expenses
- Professional fees (includes legal and accounting fees)
- Management and administration fees
- Repairs and maintenance
- Salaries, wages, and benefits (including employer’s contributions)
- Property taxes
- Travel
- Utilities
- Motor vehicle expenses
- Other rental expenses
- Prepaid expenses
2- Depreciation deduction:
According to the CRA, property such as a building wears out over time, so you can deduct the building’s depreciation as an expense. The allowed deduction amount is determined by the property’s market value, recovery period, and depreciation method used.
3- Capital Gains Exemptions :
If you have your own property in Toronto, there is no capital gain on your principal residence. You can actually get really great long term returns on a principal residence too because you save on capital gains tax.
These and other tax implications should be heavily considered as part of your overall investment strategy. Work with a professional accountant to ensure you are maximizing your tax benefits. If you have questions specific to the Toronto GTA area rental market, please come talk to us at zoodpm.