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Can You Deduct Travel Expenses in Canada?

“Can I deduct travel expenses, and if yes, then how?”, Realtors and small business owners often ask this question. 

Generally speaking, you can deduct expenses that you incur to earn business income/rental income, subject to a bunch of exceptions, as specified in the Income Tax Act.

Whether you are eligible to deduct a trip, you need to answer the primary question – did you incur these travel expenses for earning a business income?

You can watch my vidoe on this here.

Can you Deduct Expenses?

To deduct your travel expenses you need to show that your trip was for the purposes of earning a business income.  In simpler terms… it must qualify as a “business trip”.

Things you need to consider:

  • Have you left your tax home for more than one working day? Your tax home is where your business is based. 
  • Was your trip mostly business? Or did you spend the majority of your time that wasn’t occupied for the purpose of earning a business income, i.e meeting with clients vs. meeting with friends with leisure.
  • Were your expenses necessary or were they extravagant? For instance, if you rented a car out, did you go with a fair average car or did you rent a tesla?
  • Did you plan your expenses?

How Guy Laliberté tried to deduct expenses and failed

Some of you may remember the infamous court case involving the founder of Cirque du Soleil. Let’s use his case as an example:

Cirque du Soleil’s majority shareholder, Guy Laliberté tried to deduct expenses related to his travel to space as a business expense back in 2018. He claimed deduction of his entire trip in Cirque du Soleil’s operation, stating that this trip increased publicity and provided media coverage that would otherwise cost over $300million to achieve.

His trip cost roughly $42million. He deducted expenses worth $38million and left  $4million as shareholder benefit.

If he had been allowed to deduct the $38million, he would have saved 27% in taxes, equivalent to $10million tax savings.

Since the expense was NOT necessary or reasonably justified as being paid by the company, he had to report this $38million in his personal tax return, resulting in personal taxes of $19million. 

Yikes! No wonder CRA denied this claim.

The judge acknowledged the increase in media exposure to Cirque du Soleil because of his trip to space. However, the judge concluded that the primary purpose of the trip was for personal purpose rather than for business purpose based on the following reasons:

  • Guy Laliberte admitted in multiple videos’ interviews that going to space had been his childhood dream
  • The two initial payments (worth USD$25M) made to the space company organizing the trip were made by Guy Laliberte’s holding company, rather than directly from Cirque du Soleil’s operation. Resolution to authorize the trip did not mention the purpose of the trip.
  • Agreement with Space Adventures was initially signed with the Holding Company. Not directly with Cirque du Soleil.
  • There was no evidence showing that anyone other than Guy Laliberte would be sent to space.
  • Defendant claimed that the expense helped Cirque du Soleil’s debut in Russia. Russia’s operation has other arm’s length partners, the cost of the show was charged back but later got reimbursed. Russian’s operation bears no cost for the trip.
  • Cirque du Soleil did not monitor the increased exposure during and shortly after the trip was taken.
  • Cirque du Soleil’s promotion planning was started after Guy Laliberte committed to taking the trip.

In conclusion, the judge found that the primary purpose of the trip was purely personal, so he disallowed the deduction but allowed the actual costs incurred by Cirque du Soleil and One Drop Foundation to promote the trip.

Was I (Cherry Chan) able to deduct my travel expenses?

In the same year, I went to Hong Kong, to attend a family funeral. As you can tell, the primary purpose of my trip was personal.

I did spend some time doing work, but the business-related reasons were very minimal compared to the primary objective of my trip.

The simple answer to the question is no. I couldn’t deduct the flight and hotel costs of the trip.

But I was able to deduct the incremental costs I incurred for working on the business while I was there.

I didn’t incur any expenses for my video recordings and book writings. If I did, those incremental expenses would have been deductible.

If I had met up with a prospect to discuss future business opportunities, the meal costs for taking this prospect out would have been deductible.

What is deductible, if I (Cherry Chan) can’t deduct my travel expenses Guy Laliberté couldn’t deduct his?

Although the cost of my trip to Hong Kong was way less ($1,500) than the cost of Guy Laliberté trip ($42million), the rule here is the same.

The main takeaway is this: to deduct expenses, the primary reason for your trip must be a business purpose.

If the primary purpose of the trip is to attend a business-related conference or to meet with suppliers/prospects/clients – make sure you have the right documentation to prove so, (such as email communications) before you plan to deduct expenses of the trip.

The sequence of events matters.

If you also want to take a tour, have some R&R while you’re there, timing and evidence would matter.

Room & board, however, would be deductible if the trip is for business. Expenses incurred for personal enjoyment would not be deductible.

On the other hand, if you plan your vacation first, then tag on some business activities afterwards. The timing of your email communication and planning will be completely different.

Publicity may be good or bad, be careful with what you publish online.

Whenever I tell people that CRA auditors use google search as well, people always laugh.

It’s true. If you can search for the information, CRA auditors can do the same thing. And trust me, they would!

If you are telling people on social media that you are taking your family for a Disney cruise, chances are, they can also find out!

What you publish online matters.

Family can come along but be careful and deduct only what’s business related.

If your family is coming along and they do not participate in the business, you probably should keep their expenses as personal.

If the primary purpose of the family making the trip was to help at the tradeshow, you may be able to deduct expenses made on this trip.

Just be mindful with the key consideration here: is the primary reason for your trip business related or personal purpose?

Until next time, Safe travels!

Cherry Chan, CPA, CA

Real Estate Agent Accountant

What’s the HST Rebate on New Home?

A HST rebate on a new home? Can your client potentially get one? Recently, a realtor asked, “how can builders avoid charging HST on new homes?”

Another realtor also reached out to me, asking “the HST implications on buying assignments that are pre-construction homes”.

There’s a lot of confusion when it comes down to HST charged on new homes and HST rebate calculation. 

I recently made a video talking about this in depth that you can watch here:

HST Rebate & Implication on Purchasing a Brand New Home 

Buying a new home often means that the buyer has to wait for it to be designed and built from scratch.

From the moment your client signs that “Agreement of Purchase and Sale” to the time they physically move in, could range from one year to five years, and sometimes even longer.

And like anything that is purchased here in Canada, HST is applicable when your client purchases a new build too.

Yes, your client could get a portion of the HST back as a rebate assuming they qualify.

Now, most people simply assume that they are going to get their full HST back. Unfortunately that’s not the case. nly get a portion of that money is  given back – the rebate.

If the house is $500K before HST, they have to pay $565K in total ($500K x 1.13).

. In the example below , the HST rebate on this house is $24,000.

Pre-HST Price $500K

HST charged 13% $65K

Less: HST rebate ($24K)

Net sale price posted by builder $541K

This $541K is the advertised price posted by the builder, with the assumption that the buyers intended to move into the unit. (Your client may  be eligible to assign the HST rebate application to the builder if the intent is to move into the property as a primary residence. The builder will get the HST rebate on behalf of your client and your client would pay the builder $541K only instead of $565K.)

This rebate is called New Residential Home Rebate.

As I mentioned above, it’s a common misconception to think that a full rebate is applicable. Most realtors mistakenly think that their clients would get their full HST back. Unfortunately that’s not the case. It’s important to note that your client only gets the rebate – a portion of the money back.

But… What if your client doesn’t intend  to move into the property at all?

As it turns out, this $24K HST rebate is still claimable if your client is renting this new rental as someone else’s primary residence with a one year lease. 

The process of applying is a bit more complicated. 

Instead of paying $541K in our example, your client  would have to tell the builder ahead of closing that your client isn’t  moving into this new home. 

Because your client isn’t moving into this new home,they  cannot assign the New Residential Home Rebate for the builder to claim it on behalf of them. 

As a result, builders cannot claim the rebate and they’re out of pocket for the $24K rebate. 

At closing, your client/s would pay the builder the $24K, which is $565K in total. 

Once they sign a one year lease with their tenant, they can submit an application to CRA under the HST New Residential Rental Property Rebate instead.  

With proper documentation and application form, your client’s can potentially get their $24K back within 3 months after their application. Not a bad turnaround time. 

Ultimately, your client is still getting their $24K back, it’s just going to take a bit longer to claim the money back. 

Example 1 – HST Rebate New Home (winning court case)

In a recent court case, a taxpayer originally purchased a new home with the intent to move in after his wedding. Unfortunately the couple split up and the wedding didn’t happen. He sold the house a short time afterwards.

CRA dismissed the HST rebate application on the basis that the taxpayer did not have the intention to move into the new home as the primary residence, largely based on the fact that he didn’t change his address with CRA and Ministry of Transportation from his parents’ house in which he lived, prior to living in his new home.

He appealed to the court and he was able to win the case, with the help of his hydro bills that were sent to his new place, and with his friends’ testimonies stating that they helped him move from his parents place to his new place.

This takes me back to my previous blog post – keeping good documentation matters. Even something as trivial and unimportant as hydro bills, could still be evidence in court to substantiate your client’s position and claim.

Keep in mind that to qualify for HST rebate under the New Residential Home Program, your client/s needs  to demonstrate that they intend to move in at the time when the agreement of purchase and sale is signed.

Now, Intention is a subjective matter. Providing all corroborative evidence to substantiate a claim would definitely help the position of your client’s claim.

On the other hand, if your client’s intention is truly to invest in a newly built home and they have never had the intention of moving in, advise them not to  lie.

They still have a chance to claim the same amount of rebate back. All your client needs to do is to come up with the money up front at closing.  With a one year lease and proper documentation, your client can still get the same amount back with New Residential Rental Property Rebate

Example 2 – HST Rebate New Home (losing court cases)

In a 2016 court case, the taxpayer claimed she moved into a new house for half a year, before she moved back in with her husband and rented the new residence out. 

Although she claimed to have moved into her new home, she was unable to provide independent evidence (such as hydro bills) to substantiate her claim that she had lived in her new home. Her appeal to the court was disallowed and she didn’t get her HST rebate back.

Similarly in another 2016 court case, a taxpayer claimed that he and his wife were living in the new home that they just purchased while waiting for their old residence to be listed and repairs to be completed. They subsequently sold their new home 3 months after closing.

CRA caught on to them.  Because they sold their newly purchased homes within 3 months after closing, CRA thought that they never moved in.  If they never moved in, they would not have the intention to move into the newly purchased homes.  Because they never had the intention to move in, at least in CRA’s eyes, they would not have qualified to assign the HST rebate to the builder to claim.  

This couple disagreed with CRA’s position, and took CRA to court.  The couple had to provide evidence to support their intention and their claim.  

The taxpayers provided an agreement to list their old residence for sale, dated 2 years after they sold their new build, attempting to prove that they did move into this new build for a short period of time as their primary residence. The judge sided with CRA as the agreement to sell was dated 2 years afterwards.  Inconsistent with the couple’s claim. 

In conclusion, if your client wants to move into a new home, make sure they know they do know that they have to move in. They need to have evidence such as utilities bills, internet bills, moving bills, furniture delivery bills and driver license address change showing that they have moved in.

If your clients are planning to purchase a new built as your rental, make sure they know not to  assign the right to the builder to claim the residential rebate back. All they need to do is fill out a different form and they should be eligible to claim the same amount of rebate back with a one year rental agreement.

However, If your clients are planning to flip the new house without moving in, make sure you consider the loss of HST rebate as part of their cost.

Now, it’s always better to be prepared than to be sorry. Therefore, I always advise my clients to sit with their tax advisor for a personalized consultation of their situation. If you or your clients need a consultation, we’d be happy to sit with you and your client and assess the situation.

I do hope you now understand the HST rebate on new homes – New Residential Rebate –  is now simplified for you.

Until next time, happy Canadian Real Estate Investing.

Cherry Chan, CPA, CA

Real Estate Agent Accountant

P.S If you are a realtor looking to know about the tax deductions you can make, read this post here.

Should You Buy or Lease a Car to Maximise Tax Deductions?

Should You Buy or Lease a Car to Maximise Tax Deductions?

When you go to Buy a  Car, you get presented with various financing options with many car dealerships offering different promotions. 

And purchasing a vehicle is a big investment and you want to make sure you are doing this correctly.

If you finance the purchase of your vehicle, the business portion of the interest expense can also be deductible. As you can also deduct the business portion of your auto lease payment or auto depreciation, many realtors often ask the question, “ – Should I lease a vehicle, or should I buy?” 

Here is a video for those of you asking yourselves this question.

To Buy a Car or Lease a Car?

Simply put, There is no one size fits all kind of answer.  Every deal is different.

Often, you are offered a different deal (set of pricing and rates) when you lease/finance the purchase, as opposed to buying it outright; The pricing is generally higher when leasing a car than buying outright. You usually get a cash discount if you buy the car without financing. 

Also, when you lease, the calculation can be drastically different within that, depending on a high mileage lease vs a low mileage one.

The buyback value at the end of the lease term can affect the monthly calculation as well.

You can also choose to buy a car outright with your line of credit – which is with another set of calculations.

So next time when you ask your accountant, “should I buy?, or should I lease?”, you can see how complicated it is to come up with a one size fits all kind of answer..

It’s not an easy calculation to see which one will provide a better deal at the end of the day.

Therefore, every deal is different, and every individual’s needs and circumstances are different. 

It’s mostly a financial decision, rather than a tax one. 

Nonetheless, I’m going to explain the possible tax deductions of both buying vs leasing when purchasing a vehicle.

What are the tax deductions if you buy a car?

Similar to all capital assets, you are allowed to deduct the capital cost allowance (CCA), which is the tax term for wear and tear, on the car.   

Income Tax Act allows you to claim up to $30K plus HST on a passenger vehicle purchased.

You can spend over $130K on Tesla’s Model S, but you get to claim only $30K plus HST. There is a CAP on what you can claim.

To explain the tax deductions to buy a car, I’m going to use my Honda Odyssey as an example for the analysis. 

Purchase price of a Honda Odyssey  = 38K (approx) + HST

This vehicle belongs to class 10.1 and 30% depreciation rate can be applied to the purchase cost (maximum $30K plus HST) or undepreciated balance annually.

Let’s assume that you use the vehicle 100% business use for simplicity. (Generally speaking, you need a logbook to document your business-use mileage to prorate for business use. you can find out more about the documentation required from this previous post ).

So,

Year 1 – you can get a deduction of $30K x 1.13 x 30% x ½ = $5,085
(½ year rule does not apply until 2024)

Year 2 – you get a full deduction
($33,900 – $5,085) x 30% = $8,645

Year 3 – deduction is calculated on the undepreciated amount
($33,900 – $5,085 – $8,645) x 30% = $6,054

Year 4
$ 4,236

As you can see, you get a larger deduction at the beginning when you first purchase the vehicle.  Deduction available gradually goes down as years pass. 

What are the tax deductions if I lease / finance a car?

When you are leasing a vehicle, CRA also imposes a cap on the maximum amount of monthly lease payment you can deduct. Currently, that is $900 plus HST as of January 2022

Just because your lease is less than $900, it does not mean that you can get the full deduction. A complicated formula is used to determine the maximum eligible leasing cost that can be deducted on an annual basis. 

Here’s the CRA’s website link to the calculation

My monthly lease payment is $592.50 taxes included.

Keep in mind the interest rate is 4.99% on the lease and I have a high buyback value of $19,500.

Year 1 deduction
(assume only 6 months similar to the case above) – $3,555

Year 2 deduction
$592.50 x 12 months
= $7,110

Year 3 deduction
= $7,110

Year 4 deduction
= $7,110

Year 5 deduction
= $3,555 (last year of the lease) and you likely will lease another vehicle or buy out the current car or get a different car.

The chart below summarizes the buying vs leasing deductions, and it’s potential tax savings (if your rate is at 50%).

Lease VS. Buy

From a tax perspective, the tax deductions between buying and leasing are very similar.  Buying allows you to take bigger deductions at the beginning of the ownership, whereas leasing means that you have a straight line deduction during the lease period. 

You may think it is more beneficial to lease, but…

Don’t forget that I pay 4.99% interest on my lease, which is translated to $5,638 for the entire term for 4 years.

You wouldn’t have this cost incurred if you were buying it outright.

What if it is a zero % interest rate?

Yep – buying gives a slight edge in my Honda Odyssey calculation.

If the lease rate is 0% which will not happen, you will have a tax saving of $9,765, less beneficial than buying. (See chart below)

Lease vs. buy

From the math analytics above, buying allows you to deduct more at the beginning, whereas lease deduction is smooth out over time.

It’s hard to come up with a pure apple to apple comparison given that interest rate and buyback value have a significant impact on the calculation.

What if I use my vehicle for both my self-employed business and my rental properties?

 If you drive the same car for your agent business and your rental properties, you are eligible to deduct the business portion for car expenses against your agent business income and the rental portion against your rental properties portfolio.

Say in year 1, you drive 5,000 km for your self-employed business and 3,000 km for your rental properties.

If you purchased the minivan, you can deduct Capital Cost Allowance (CCA) of $10,170 x 5,000km / 10,000km = $5,085 for your agent business.   

You can also deduct an additional CCA of $10,170 x 3,000km / 10,000km = $3,051 against your rental properties income.

Administratively, you are required to record the mileage seperately. pecifically used for your business, and the mileage specifically used for your rental properties separately.

Other considerations

  • What if you are a realtor driving your car from Barrie to St Catharine’s multiple times a week? You will have high mileage on the vehicle which generally is not suitable for leasing.
  • What if you know that the cost of maintenance is high, but you still want to drive the car when it’s new?
    Certain European cars are well known to have high maintenance cost around the expiry of manufacturer warranty. He loves the car, but he doesn’t want to keep it long term, better lease it and not to worry about the long-term maintenance cost.
  • You can sell the car at the end if you don’t like, but you can’t sell a leased vehicle.
  • Do you own your business in your personal name or corporation? If you own your business in a corporation, driving an old car would still allow you the same mileage deduction at $0.59/km for the first 5,000km and $0.53/km thereafter.
    If you don’t need to incur the cost to buy a new car, why bother?

Until next time, happy Canadian Real Estate Investing.

Cherry Chan, CPA, CA

Your Real Estate Accountant

How Realtors Maximize Tax Deductions on Gift Cards

As a Realtor, you may wonder if you can claim tax deductions on gift cards? If yes, then how?

Generally speaking, any expenses you incur for the purpose of earning income are tax deductible. Subject to certain limitations as specified by the Income Tax Act, ofcourse.

Limitations, such as subsection 67.1(1) of the Income Tax Act, that reduces the meals and entertainment expenses to 50% tax deduction instead of 100%, in respect of human consumptions of food or beverages or the enjoyment of entertainment.

This simply means that if you take your clients out for dinner, only half of the meals are deductible. You can spend $50 for both of you, but only $25 is deductible. This is stated in the Income Tax Act to eliminate the personal enjoyment portion of your meals.

You may also wonder, if you can deduct 100% of your meals expenses if you purchase restaurant gift cards entirely for the enjoyment of your clients without any of your participation?

Example: Real Estate Agent claims Tax Deductions

A self employed real estate agent, as a taxpayer in 2006 had already brought this scenario to court (The Queen v. Stapley, 2006 DTC 6075). The taxpayer often bought gift certificates for food and beverages and tickets of various sporting events to his clients. He did not attend the dinners and the sporting events and hence he deducted 100% of the costs.

Initially the Tax Court ruled in favour of the taxpayer, based on the fact that the purpose of subsection 67.1(1) was to eliminate the personal enjoyment component from the deductions and the taxpayer did not participate in any of these events.

Unfortunately, the Minister appealed the decision made by the Tax Court to the Federal Court of Appeal. Based on the literal translation of section 67.1(1), expenses for food, etc. are 50% tax deductible in respect of human consumption of food and beverages or the enjoyment of entertainment.

Just because the realtor did not get to enjoy the entertainment or the food and beverages, his clients did. And just because the objective of section 67.1(1) was meant to eliminate the personal enjoyment portion, the section was not written in such a way that it wouldn’t be applied if there was no personal enjoyment.

The judge reluctantly ruled in favour of the Minister. This means that all the gift certificates issued from a restaurant would be 50% deductible, not 100%.

Furthermore, in 2014, Judicial and CRA Interpretations of Canada Tax Law and Transactional Implication stated that if the gift certificates are issued by the supermarket, a permanent establishment that is primarily engaged in selling food and beverages, section 67.1(1) applies and only 50% of the expenses incurred are deductible.

Say, you are buying a Home Depot gift card, for the purpose of earning the property income. As Home Depot is not an establishment that is primarily engaged in selling food and beverages, you should be able to claim the expenses 100% as tax deductions.

On the other hand, if you purchase a Tim Hortons’ gift card (restaurant) or a No Frills’ gift card (grocery store), you may spend $100, but you only get to deduct $50.  Only 50% is tax deductible. 

So… when you are selecting your client gift card to your clients this year, you know which ones give you maximum deduction!

Last tip, when you purchase gift cards as clients’ gifts, make sure that you document the person whom you give the gift cards to and their contact information.  In the unfortunate event of a CRA audit, you can be asked for the clients’ names and phone numbers.  

You can find out more about my favourite gift cards in the following video:

Oh and if you want to know “How to claim tax deductions with gift cards as landlord”, click here.

Until next time, happy Canadian real estate investment!

Cherry Chan, CPA, CA

Canadian Real Estate Accountant

10 Tax Deductions You Can Make As A Realtor

What tax deductions can you make as a Realtor? To understand Realtor Taxes we need to understand how realtors are categorized. Realtors, like many other professionals, can own their businesses or be hired as employees.  

When you are an independent realtor, you are operating a business. Operating a business means that you are allowed to deduct all reasonable expenses incurred for the purpose of earning the income, subject to some exceptions.

Tax deductions “general deductibility” rule

Canadian Income Tax Act allows Canadian taxpayers to deduct reasonable expenses incurred for the purpose of earning business or property income, subject to a bunch of exceptions of course. This means that as long as you’re able to establish the cause-and-effect relationship between incurring the expenses and earning the particular stream of income, you can potentially deduct the expense.

Next time, when you are incurring an expense which helps you earn property income,keep the receipt.

If you are unsure whether you can deduct certain types of expenses, compile all your receipts and at year-end have a conversation with your real estate tax accountant.  They will be able to tell  you if you can deduct these expenses, just as I advise my clients.

Earning your tax deductions

I always say that in Canada, you gotta earn your deduction. This means that, as a minimum, you need to keep receipts to support your expense deduction.

If you give a cash rebate to your client for a successful deal, document the name of the client, the address of the completed deal, and provide proof of payment. These are the details that CRA is looking for.

As a word of caution, credit card statements and bank statements are generally not sufficient to substantiate your claim.  

I talk about this and the 10 basic tax deductions you can make in this weeks video here

Top 10 tax deductions for realtors when filing realtor taxes

As a realtor, you incur many different types of expenses to generate income.  As mentioned before, the key to tax deductions is to establish a cause and effect relationship and you will be able to get some sort of deduction.

Some tax deductions realtors can submit

1. Meals & entertainment

To qualify for tax deduction (even 50% deduction), you’re required to incur the expense for the purpose of earning the business income.

So, if you take your clients out for lunch, that can be a deductible meal. However, if you take your parents out for lunch and they are not your clients, that lunch is not a deductible expense.

My book “Complete Taxation Guide for Canadian Real Estate Agents” here, explains this to you in more detail, giving you the best tips along the way!

2. Advertising/Staging costs

Any advertising costs incurred for the purpose of earning your business income and bringing in leads are tax deductible. 

This includes your website cost, website developer cost, hosting fees, web design cost, Facebook, Youtube, Google, Instagram and even Linkedin advertising fees. 

But make sure you have a conversation with your accountant who understands your individual situation as a realtor.

3. Insurance

Insurance expense is tax deductible.  If you have your own office space, you might also need to carry general liability insurance, which is also tax deductible. 

4. Brokerage fees and other related charges

Fees you pay to your brokerage to maintain your license are deductible. Typical charges include desk fees, transaction fees, split of commission, franchise fees, office administration charges, etc. 

5. Professional dues and Memberships

Professional dues and memberships include fees you pay to your board, license fees with the real estate governing body, and other professional memberships. 

6. Client rebates

Client rebates, common in the real estate business like all other expenses, incur for the purpose of earning the real estate agents income.  It is a way to secure business, and sometimes it is a way to say thank you to our clients. 

My book shows realtors the 2 different ways to issue a client rebate.

7. Referral fees

From the Income Tax perspective, as long as the expense incurs for the purpose of earning the commission income, you’re eligible to deduct the expense (subject to some exceptions). Referral fees are not part of the exception. 

8. Coaching, education, and conferences

Coaching costs are tax deductible expenses. Provided that they incur for the purpose of helping you improve your business income. 

9. Client gifts/Gift cards 

As a realtor you can file your client gifts/gift cards as tax deductions… if you can tie the client gifts to your commission income. Client gifts can include appliances. Make sure you purchase the proper gift cards to get the best deduction for your money. You can always read more in my book or schedule a consultation. Just make sure you talk to an accountant if you’re not sure the expense is deductible!

10. Subcontractors Assistants and Salaried Employees

My understanding from working with many realtors is that hiring an assistant can help you propel your business significantly.  I witnessed it first hand how my husband’s assistant helped him grow his team from two agents to four agents.  

From a tax and legal perspective, you can hire an assistant as an employee, or as a subcontractor.  

Hiring your assistant as a subcontractor loosely means that you’re hiring another business to do the work for you. 

Hiring someone as an employee means that you have someone full time dedicated to help your business.  

Additonal tax deductions …

11. Home office expense

You are eligible to deduct home office expenses as long as you meet one of the criteria below:

  • Your home office is the principal place of business; or
  • You use the space exclusively to earn business income and you use it on a regular and ongoing basis to meet your clients, customers, or patients

Now, let’s assume you qualify with one of the criterias listed above. What can you deduct?

You can deduct the following expenses:

  • Maintenance costs such as heat, home insurance, electricity, and cleaning materials.
  • Property taxes
  • Mortgage Interest
  • Home internet
  • Repairs
  • Capital cost allowance

If you rent, you can deduct rent.

You can deduct part of the expenses that are related to running your business. This can be calculated based on the size of your home office in relation to the size of your home.

12. Automobile expense

Deducting business use of automobile expense is allowed and often one of the most overlooked deductions.  

To properly count automobile expenses as tax deductible, the first thing you need to keep is an autolog. 

It is a lot of work to set it up right, but once set up and there is no substantial change in your business usage, you may be able to keep a smaller logbook in subsequent years.

Deductible automobile expense

In addition to your mileage expenses, you can deduct the following automobile expenses:

  • Fuel and oil
  • Interest
  • Insurance
  • License and registration
  • Maintenance and repairs
  • Any other expenses that are directly related to operating your vehicle (I usually include my 407ETR bill as other expenses)
  • Lease payment or capital cost allowance

The total of these expenses is then prorated based on the business use mileage or rental use mileage for deduction purposes.

To sum it up, the tax deductions you can make as a realtor depends on the different types of expenses used to generate income.  Establish a cause and effect relationship and you will be able to get some sort of deduction.

Until next time,

Happy Canadian Real Estate Investing.

Cherry Chan, CPA, CA Your Real Estate Accountant