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Q. I was wondering if you can help me clarify some tax items that I cannot understand from the CRA’s website. My husband and I purchased a 4-plex early last year which we rent out. We are both Canadian citizens.
Are we allowed to deduct the cost of our meals when we travel to maintain/repair the property? What about any entertainment costs (mainly meals) provided to those who we do business with related to this 4-plex? For the Motor Vehicle Expense deduction, is the 4-plex considered “one rental property” or “more than one rental property?”
And finally, are there any other little-known deductions that we should consider claiming? We’re new to this.
A. Hi Manny. I’ll try to answer your questions one at a time. The Canada Revenue Agency (CRA) has made the deductions for meals a veritable minefield. Typically, CRA views any meal or accommodation expense in relation to the rental property as a personal expense. This holds true for both travelling to repair the property, and entertaining vendors who provide goods or services to maintain the property. A claim for mileage can be made, but only if you travel to perform repairs and maintenance—not for collecting rent.
Your question regarding whether a 4-plex is one rental property or more than one relates to the CRA position that you can claim mileage if you travel to collect rent from more than one rental property. I think CRA would argue that your 4-plex is one property, and would look at the facts: there is one building comprised of four units; the building is taxed as one property for property tax purposes; when you purchased the property, it was sold as a single property.
In managing the affairs of the rental property, always keep all receipts related to it so that your accountant can evaluate the type of expense at the year end and make a determination as to its deductibility.
Finally, there may be some expense claims you are be aware of. They include the cost of advertising for tenants, mortgage application fees, interest on rental deposits, costs to change the locks, and legal fees for preparing a rental contract.
Landlords often ask me if they can deduct the value of their labour. CRA views this as a personal contribution to the overall value of the building, which you, as the owner, will ultimately reap when you sell the property, and therefore it is not deductible.
Theresa Morley, CAP, CA, is a partner with Morley Chartered Accountants in Barrie, Ont. She blogs at MorleyCPA.
Re deducting the value of a landlord’s labour, I think the CRA’s actual position is that, sure, you can deduct the value of your labour from your rental income — but then you have to add in that same amount as employment income, so the net effect on your tax owed is zero! Actually, as some kind of income but not earned income, as then it would increase your RRSP deduction limit & rental income doesn’t.