rental | pro INVESTING IN rental property — even renting out part of your own home — can prove profitable, Knowing the tax rules can help you keep more of that profit. SS erty investment should capitalize the cost. Mike Grenby is a North Shore-based columnist and in- dependent financial adviser who refinished; because you are restor- ing the house to its original condi- tion, the expense should be con- this quidified under repairs and mtintenanee as the old flat roof had leaked badly. Even if you lose money on the rent, in most cases you should be able to claim that loss against your other (employment, invest- ment, pension) income. Naturally you'd want the property’s after- tax increase in value to more than cover your loss. Start by asking your local tax office for its 30-page Rental In- come Tax Guide, which contains the forms you must complete to declare revenue property income and claim all the deductions. Pages 8 and 9 of the current guide list typical expenses you may claim, from advertising costs to moter vehicle expenses (which depend on the number and Soca- tion of the properties) to legal ex- penses to salaries and wages (pay- ing family members in a lower tax bracket to do work relating to your rentals is a great way to save tax) to tax return preparation fees. Pay particular attention to the item headed ‘‘Maintenance and repair costs.’’ Says the guide: ‘‘If you make repairs to your proper- .ty, you can deduct ihe cost of labor and materials. However, you cannot deduct the value of your own Jabor.’* Ideally, you want to be able to deduct 100% of the money you spend on maintenance and repairs. But Revenue Canada could decide certain items are capital expen- ditures. However, even though the roof didn't change the appearance of the building and didn't increase its value, the new roof created ‘an improvement to the building of an enduring nature’ and was dif- ferent fron the previous roof. So this was a capital expense and the woman could claim only the depreciation percentage each year. The Money Reporter newsletter suggests din aggressive approach: “Because of the big tax advan- tage maintenance enjoys, we sug- gest if you're in doubt about whether you have improved or maintained your property, (reat the expense as maintenance. If Revenue Canada quibbles, you'll have the opportunity to argue your case at that time.”’ The Money Reporter says you can eliminate many problems “by simply ensucing your invoice states that restoration or repairs are in- volved. “‘Most major improvements almost certainly include some maintenance costs (like painting) along with the structural changes. Make sure the contractor details the various expenses. A statement showing only one charge may force you to capitalize the entire outlay.” The amount involved isn’t always relevant. The newsletter gives an example: You might spend a large amount to have the floors in a house sanded and Michael DOLLARS AND SENSE In that case you are supposed to add the amount to the value of the building and claim only depreciation — deducting a small percentage (typically 5-10%) each year on a declining balance. In its newsletter, Tax Topics, CCH Canadian Limited cites a court decision which backed Rev- enue Canada’s ruling against a taxpayer. The woman operated commer- cial property under the terms of a settlement with her former hus- band. She spend $33,039 fora new pitched roof and claimed this expense as a deduction; she felt Lottery winner planning trip to Spain NORTH -VANCOUVER resident Norah Redondo came. up $95, 600 richer after a recent dip. 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However, if you installed wall- to-wall carpeting, probably ata considerably lower cost, Revenue Canada would probably argue you upgraded the place and that you works with individuals; he will answer your questions as space allaws — write to him c/o The North Shore News, 1139 Lonsdale Ave., North Vancouver V7M 2H4, WE'RE BUILDING FOR THE FUTURE, BHD WERE OPEN FOR BUSIHESS! Ambleside Self Serve 1499 Marine Drive West Vancouver While our new sales building is being re-built, we are operating out: of a construction trailer at the N.'W. comer of the lot. i2 PACK SOFT DRINKS plus deposit and taxes ‘witha gasoline fill. $4.99 without a gasoline fill. Offer avallable Jun 21- Sep 3/93 at Ambleside Self Serve, 1490 Marine Drive, West Vancouver. “4 While the reasons we oe for ‘bonding may vary, the results are remarkably consistent: wrecked vehicles, personal injury and death. In British Columbic, we simply can’t afford the cost any longer. 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