Apr 19, 2021
As you may know, we have supported a request to the CRA to extend the April 30 deadline to June 15. But if the deadline is NOT extended, here are some practical tips to reduce the burden of a COVID tax season.
“If you own more than one property, keeping track of expenses may help in determining which property to claim as the principal property.”
The principal residence exemption is one of the major tax savings mechanisms available to Canadians. Taxpayers may have more than one principal residence (including domestic and foreign vacation homes), but the exemption is generally only available on one principal residence.
It is not always better to claim the exemption on the first property to be sold as a second property may have a greater potential gain that could be sheltered. However, it is human nature to want to avoid paying tax now, even though the savings from using the exemption later on the second property, may be greater.
This decision can be more palatable if the full cost (“ACB”) of both properties is captured. Expenses such as re-roofing the property, installing central air conditioning or a new furnace, landscaping and renovations all increase the ACB of a property and reduce the potential capital gain on a sale.
Keeping track of these expenses is easy and can result in significant tax savings by reducing the capital gain on sale and by allowing an accurate determination of which property to claim as a principal residence.
TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes.
The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.
TAX TIP is provided as a free service to clients and friends of Cadesky Tax.
The material provided in Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Cadesky Tax cannot accept any liability for the tax consequences that may result from acting based on the contents hereof.