Tax on positive cash flow

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styxworld

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Jan 6, 2008
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Hello Everyone,

I am not familiar with the taxes involved with investment properties. I do know that i would have to pay the property taxes, which is normal. What about income taxes on the positive cash flow.
I heard i can deduct the interests from the mortgage of my investement property, as well as the property taxes. Is it true?
Does the remainder of the rent get included in my taxable income? Is there a special rate of tax for investment property (i live in Toronto)?

Example : Rent/month : $1200, Property taxes $150, Mortgage payment $500, condo fees $300. Would the income tax be paid on the 1200-500-150=550
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or the 1200-150-300-500=250
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.

THank you very much for your help
 
N

navaz

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Nov 12, 2007
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#2
I assume you own a rental property in your own name. Personal taxes are based on your net rental property income-not to be confused with cash flow. Cash flow is what you have described there -there may be other expenses that you have not thought of claiming but have incurred.

To your cash flow -add the principal payment on the mortgage -that is not deductible (when you got the mortgage you did not pay tax on it so when you payback the principal portion of the mortgage it is not deductible -mortgage interest is deductible) and then you can make a decision on cca
 
Thomas Beyer

Thomas Beyer

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Aug 30, 2007
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QUOTE (navaz @ Jan 7 2008, 07:48 AM) ...

To your cash flow -add the principal payment on the mortgage -that is not deductible (when you got the mortgage you did not pay tax on it so when you payback the principal portion of the mortgage it is not deductible -mortgage interest is deductible) and then you can make a decision on cca

Usually you depreciate a property over 25 years (i.e. by 4% per year) which usually offsets all income in the first few years of a property. Usually you pay no income taxes on rental income or cash-flow until you have substantial cash-flow or a much reduced mortgage .. or when you sell (assuming it has gone up in value which it may not have)!
 
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