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Is Home Insurance Tax Deductible In Canada

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Is Home Insurance Tax Deductible

The 8 Best Tax Write Offs for Small Businesses in Canada

7-minute read

May 16, 2021

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Owning a home comes with its own set of expenses, from mortgage payments to home repairs. On the other hand, one of the perks of owning your own home is the tax breaks that come along with it.

Homeowners insurance is one of the main expenses youll pay as a homeowner. Homeowners insurance is typically not tax deductible, but there are other deductions you can claim as long as you keep track of your expenses and itemize your taxes each year. Weve compiled what you need to know to help you save thousands throughout the year.

Can You Write Off Mortgage Interest If Youre Working From Home

The past year and a half have seen record numbers of people across the country working from home. If you own your own business, you can deduct expenses for the business use of your home workspace, as long as it meets one of two conditions: Its your primary place of business or you use the space only to earn business income.;

In this case, you can deduct mortgage interest, along with other things such as electricity, property taxes, and heating. But, relative to the portion of your home youre using for business purposes.;

Say you occupy a room that is 100 sq. ft. in your 2,000 sq. ft. house, and work there 5 days a week for the year. The math works out to 5% of your home x 260/365 days. So, if your electricity bill is $1,200 per year, then you can claim $42 for business use.;

Dont fret if it sounds confusing, the tax software companies make it simple and do the math for you.;

Finally, mortgage interest is not tax-deductible if youre working from home for an employer.;

Can Home Insurance Companies Deny Coverage In Ontario

It is possible, though uncommon, for insurance companies to deny you coverage. Typically, this denial is the result of issues like poor claims history, missed payments and gaps in insurance coverage.

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Medical Home Improvement Deductions

You may make home improvements or upgrades for medical reasons. In that case, you may qualify for additional tax deductions. Medical home improvement could include adding ramps, installing elevators, widening doorways, installing handrails and more. The main requirement to qualify for this deduction is to be able to prove you have a medical reason for requiring the upgrade.

Youll need to itemize your taxes using Schedule A of the 1040 form to claim this deduction. You can only claim medical improvement expenses that surpass 10% of your adjusted gross income. If the improvement increases your homes value, youll also have to subtract that value increase out of the amount you claim.

For instance, you might install ramps in your home and spend $20,000 doing so, but they may only increase your homes value by $7,500. In this case, you can only deduct $12,500 . This deduction can get a little complicated, so talk to a qualified tax specialist to help you better understand which improvement qualifies for this tax break and how much you can claim for each improvement.

What If I Receive Health Benefits From My Employer

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If you happen to work for a company that pays for your health plan, then those costs cannot be claimed as health expenses, since they would be paid for directly through your plan or reimbursed to you.Although you cannot claim plans paid by your employer, you can claim what you pay out-of-pocket. This means that all eligible medical expenses not covered by a health insurance plan may be claimed. For example, let’s say you went to the dentist. Your charges were $500, but your health insurance plan only reimbursed you for $300. You can then claim $200 since that is what you paid out-of-pocket. Remember, you can only claim the portion of the premiums you pay yourself, not any amount covered by your employer.

Other qualifying medical expenses are premiums you pay for yourself, your spouse, common-law partner, or for anyone you are connected to by blood to a private health services plan . These expenses can be claimed on your income tax and benefit return. Refer to the CRA website for more details.

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Calculating Your Work Space In The Home Expenses

If you choose to use the detailed method, you will need to calculate your employment-use percentage.;

To do so you must determine:

  • ;the type of work space used
  • the percentage of your home that you use as a work space
  • the number of hours you use the space for work
  • the number of workers that worked from home;

Employees Who Are Shareholders

When you are an employee and also a shareholder of a business, there are two conditions that must be satisfied before employment expenses can be claimed. They are:

  • The expenses were incurred as part of your employment duties, and;
  • You were required to pay for the expenses yourself as part of your employment duties.

When an employee is also a shareholder, these two conditions can be satisfied in the following way:

If you are a shareholder-employee however, an implied requirement may be more difficult to demonstrate and a written contract may not be adequate to establish that you were required to pay for the expenses as part of your employment duties.

To satisfy this condition, you must be able to establish that the expenses are comparable to expenses incurred by employees with similar duties at your company, or at other businesses similar to your company in size, industry and services provided. This will support that you were required to pay the expenses to fulfill your obligations in your capacity as an employee.

You must satisfy both conditions to deduct the expense on the income tax and benefit return. If both conditions are met, you may, as a shareholder, have the authority to certify Form T2200, Declaration of Conditions of Employment, for yourself or a related employee.

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Frequently Asked Questions About Tax Deductions For Businesses

Q: I am self-employed and I need to buy appropriate business attire to meet my clients. Can I deduct these wardrobe purchases as an expense?

A:You cannot deduct the clothing that you will wear. Any personal expenses are not deductible, says the CRAs Trépanier.

Q: I got a parking ticket after a meeting with a client ran late. Can I deduct it?

A:Penalties such as fines and parking tickets cannot be claimed, she says.

Q: I have one cellphone that I use for work and home. How do I claim that as an expense?

A: You have to determine the portion that is used for business and you deduct only that, Trépanier says.

Q: I have a cleaning service and I buy the cleaning supplies for my business. What can I deduct?

A: You can claim the cost of your cleaning staff and your cleaning supplies for your business. If you operate your business at home, you can make these deductions if they are related to your work space, according to Trépanier.

Q: I have the Internet at work. Can I claim it as an expense?

A: It can be claimed 100% at your principal place of business. However, if its a home office, only a portion of the Internet can be claimed for its use in your work space. You have to evaluate the time that you use the Internet for your home business.

Q: I own a small business and I have one car that I use for both work and my family. What is my motor vehicle deduction?

Q: I have an office at my business and at my home. Can I claim both as an expense?

Quebec Home Buyers Tax Credit

How To Make Your Home Mortgage Tax Deductible in Canada

You may be entitled to a maximum $750 tax credit if you were resident in Québec on December 31, , and during that tax year,;either:

  • you or your spouse bought a qualifying home for the;first time;and you intend to make it your principal residence ;;or
  • you bought a qualifying home and intend to make it the principal residence of someone related to you who has a;disability. The residence must either:
  • be more accessible for the disabled person or set up to help the person be more mobile or functional, or
  • provide an environment better suited to the persons personal needs and care.

You can split the amount between everyone who is eligible to claim the credit for the same qualifying home.

For the complete list of conditions and to calculate the amount of the credit, use this form on the Revenu Quebec website, form;TP-752.HA-V,;Home Buyers Tax Credit.

Use our new;Free Canadian Tax Software;to help ensure you dont miss any of the deductions or credits you deserve. Its easy, fast, and 100% accurate, guaranteed. For more info on TurboTax Free,;.

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When Youre Buying A Home Consider The Cost Of Homeowners Insurance

You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. It may also be cheaper if your homes electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it’s more wind resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 to 15 percent.

Check the CLUE report of the home you are thinking of buying. These reports contain the insurance claim history of the property and can help you judge some of the problems the house may have.

Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you’ll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at www.fema.gov/nfip/. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority provides this coverage.

Payments To Foreign Affiliates

Interest, rents, royalties, management fees, and other payments made to related non-residents are deductible expenses to the extent that they are incurred to earn income of the Canadian corporation and do not exceed a reasonable amount. In certain cases, the receipt of these payments by a foreign affiliate of the Canadian corporation or of a related person can give rise to FAPI, which is taxable on an accrual basis in Canada.

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Employees Of A Transport Business

You can claim the cost of meals and lodging if you meet all of the following conditions:

  • You work for an airline, railway, bus, or trucking company, or for any other employer whose main business is transporting goods, passengers, or both.
  • You travel in vehicles your employer uses to transport goods or passengers.
  • You regularly have to travel away from the municipality and the metropolitan area where your employer’s relevant establishment is located.
  • You regularly incur meal and lodging expenses while away from the municipality and the metropolitan area where your employer’s relevant establishment is located. This means that you must generally be away from home overnight to do your job.

You must reduce your claim for meal and lodging expenses by any non-taxable allowance or reimbursement you received or are entitled to receive from your employer.

For information on meal allowances and subsidized meals, see Information Circular IC73-21, Claims for Meals and Lodging Expenses of Transport Employees.

Tax Deductions On Rental Property Income In Canada

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Teacher Man |

Modified date: Apr. 12, 2020

Editors note:

After looking into real estate and if it was truly a viable option in Canada today, and then looking into whether I should go with a mortgage broker or bank, I decided that I had better understand some of the tax code associated with the income you get from being a landlord.; I knew that there were several tax deductions available in Canada when you begin earning rental income, but I wasnt sure on the details.; This became especially pertinent when I crunched the numbers and realized that my ROI wouldnt be spectacular with the investment so I should figure out how to shelter as much of it as possible from the tax man.; It turns out there are a lot of options available to accomplish this purpose.

While Im still no expert in income tax preparation, or the application of some of the greyer areas of tax deductions applicable to real estate, I think Ive got a pretty good handle on the basics.; When it comes to tax write offs for landlords, expenses that can be claimed are generally broken up into two categories: current expenses & capital expenses.

Deducting depreciation of the property against your income is useful in sheltering your cash flow, but the tax man will get his day when you sell the property and it comes time to figure out your capital gains.

The Normal Deductions on Rental Income

Here is a list of the other things you can deduct according to the Canada Revenue Agency:

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How To Complete Form Gst370 Employee And Partner Gst/hst Rebate Application

You must complete;parts;A, B, and;D of Form;GST370. If applicable, your employer has to complete;Part C . Use a separate form for each tax year.

Part;A – Identification

The tax year of claim should be the same year as the income tax and benefit return for which you are claiming the GST/HST rebate.

Part;B – Rebate calculation

Calculate your rebate based on the expenses you deducted on your income tax and benefit return. These expenses include GST and PST, or HST, and tips .

For eligible expenses on which you paid GST, you can claim a rebate of 5/105 of those expenses. For eligible expenses;on which you paid HST, you can claim a rebate of 13/113, 14/114, or 15/115 of those expenses, depending on which HST rate applied to the purchase.

In certain cases, you may have to do an additional calculation if you bought property and services in one province and brought them into a participating province. For more information, see the section called Situation;5 – Property and services brought into a participating province.

Refer to the following situations to determine how to calculate your rebate based on your particular case. When you calculate your rebate, use only the expenses deducted on your income tax and benefit return.

Situation 1 – The only expenses you deducted are union, professional, or similar dues

Note

Columns 3B, 3C and 3D represent the HST rates for the participating provinces applicable to your situation.

Situation 2 – You deducted only GST expenses

Note

Salaries And Management Fees

You can deduct amounts paid to your employees. you cannot deduct a salary for yourself. If you are an employer, you should deduct your contributions to the CPP and EI plans. You can also deduct amounts paid to a third party to manage your property and amounts paid to a realtor to sell your property.

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Immediate Expensing Of Capital Property For Ccpcs

The 2021 federal budget proposes to allow CCPCs, in the year that the eligible property becomes available for use, to immediately expense up to CAD 1.5 million per taxation year of eligible property acquired after 18 April 2021 that becomes available for use before 2024. Eligible property consists of capital property subject to the CCA rules, other than property included in CCA classes 1 to 6, 14.1, 17, 47, 29, and 51.

Salaries Wages And Benefits

How to Make Your Home Mortgage Tax Deductible in Canada – Tax Tip Weekly

You can deduct amounts paid or payable to superintendents, maintenance personnel, and others you employ to take care of your rental property. You cannot deduct the value of your own services.

As the employer, you must deduct your part of the following contributions:

You can also deduct workers’ compensation amounts payable on employees’ remuneration and Provincial Parental Insurance Plan premiums. The PPIP is an income replacement plan for residents of Quebec. For details, contact Revenu Québec.

For more information on making payroll deductions, go to Payroll. ;

You can also deduct any insurance premiums you pay for an employee for a sickness, an accident, a disability, or an income insurance plan.

For more information on wages, go to Guide T4001, Employers’ Guide Payroll Deductions and Remittances.

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Extractive Sector Transparency Measures Act

The Extractive Sector Transparency Measures Act requires public disclosure of government payments made by mining and oil and gas entities engaged in the commercial development of oil, gas, or minerals in Canada or elsewhere. It also applies to entities that control another entity that engages in these activities. However, an entity will be required to report only if it:

  • is listed on a stock exchange in Canada, or
  • has a place of business in Canada, does business in Canada, or has assets in Canada, and, based on its consolidated financial statements, meets minimum asset, revenue, and/or employee thresholds.

This mandatory reporting standard for extractive companies applies to payments of CAD 100,000 or more in a year that have been made to foreign and domestic governments at all levels, including Aboriginal groups. Both monetary payments and payments in kind must be reported.

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