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Rental PropertyI live in Saskatchewan. Currently my net

Resolved Question:

Rental Property

I live in Saskatchewan. Currently my net return income goes on top of salary and I pay a great deal of tax on it. 44% to be precise as it goes in the top tax bracket.

I am hoping to start a property management firm. It will charge enough that my rental income will be nil after expenses.

The profit will then end up in the property management from the fees (fees for collecting rent, finding rents, maintenance etc.). I will be able to write off more expenses and pay a small business tax rate of approx 13%? I will leave the money idle in the corporation for now as I do not need.

Do you foresee problems with this? Or have suggestions.
Submitted: 1 year ago.
Category: Finance
Expert:  Rachel-Mod replied 1 year ago.

Hello,

I'm Rachel, and I’m a moderator for this topic.

We have been working with the professionals to try to help you with your question. Sometimes it may take a bit of time to find the right fit.

I was checking to see if you had already found your answer or if you still needing assistance from one of the professionals.

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Customer: replied 1 year ago.

still need answer.


 


Thanks

Expert:  Rachel-Mod replied 1 year ago.
Hello,

Thank you, XXXXX XXXXX continue to look for a professional to assist you. Please let me know if I can be of any further assistance while you wait.

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Expert:  Lindie-mod replied 1 year ago.

Hello again, :)


We are still working with the professionals to find you the best possible match. I wanted to touch base to see if you still needed a professional’s assistance.

Please let me know if you would like to continue to wait or if you would like to cancel your question at this time. We sincerely XXXXX XXXXX the extended wait time.

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Customer: replied 1 year ago.

yes please continue.


 


Thx

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

Hello and welcome. Thank you for using Just Answer.

Let me confirm gladly that you are on absolutely correct path. You have planned correctly. By incorporating your business and charging through it, you will certainly reduce your tax bracket / liabilities.

I wish you good lunch going ahead. I she one your thoughts.

Hope this helps.

Please rate this positively if this helps as this is the only way we get credit for assisting you. Alternatively, feel absolutely free to revert with further queries.

Warm Regards....
Customer: replied 1 year ago.

I understand that. My is regarding the tax treatment of the management company. If you have rental properties and incorporate them you will still be charged the 44% high tax rate because it is seen as passive income does not qualify for small business tax rates.


 


Now if I start a management/maintenance and bill my rental properties will I be able to quantify my management/maintenance company for small business rate or with the CRA see this as just try to avoid a higher tax rate?


 


If the management/maintenance corporation works only for properties I own personal does it make a difference?


 


 


Thanks,


 


Jon

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Jon,

Hello and welcome again. Thanks for your follow up question.

No.. I do not think that CRA will view this as a method of tax evasion. This is because the newly incorporated entity would be exclusively in rental as would obviously take all benefits of business deductions available.

This would be perfectly proper to do so.

It would be fine if the management/maintenance corporation works only for properties you own.

Hope this helps.

Please rate this positively if this helps as this is the only way we get credit for assisting you. Alternatively, feel absolutely free to revert with further queries.

Warm Regards....
Customer: replied 1 year ago.

Is there a maximum management fees can be? or can i out with high enough that all rental properties break even and I don't have to pay tax on them?


 


 


I.E. all the money would end up in the management corporation and the tax would then be at a small business rate.


 


Regards,


 


Jon

Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,

Here would be a little catch. Do not keep the management fees too less that it deliberately looks lower. You may keep it somewhat lower than than the prevailing market rate but do not keep it too low that CRS views it ad purpose full. It is only this point that you need to take care off.

Hope this helps.

Please rate this positively if this helps as this is the only way we get credit for assisting you. Alternatively, feel absolutely free to revert with further queries.

Warm Regards....
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3906
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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Rakhi Vasavada
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Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years