Tax credit when renting property from a member of the family
There’s a lot to unpack along with your query, Satyesh, however I’ll tackle your direct query proper off the bat.
In case you lease actual property from a member of the family, in the event you each deal with it as a reliable landlord-tenant relationship, you could possibly declare a tax credit score simply as in the event you had been renting from a 3rd get together.
Ontario has an power and property tax credit score, Quebec has a solidarity tax credit score, and Manitoba has a residential renters tax credit score. Every of those has a lease element and should lead to tax financial savings for decrease revenue taxpayers.
Your daughter would report the rental revenue and deduct relevant bills like property taxes, insurance coverage, utilities (if she pays them) and mortgage curiosity (if relevant). It bears mentioning that she might find yourself paying extra tax on the web rental revenue than you’ll save on the tax credit score.
Tax implications of a property switch between relations
In case you switch your own home to your daughter, the switch will happen at honest market worth, even when she doesn’t pay you for it. Assuming the property qualifies as your principal residence, then you’ll not pay any tax on the switch. You will need to report the disposition in your tax return, Satyesh, so as to declare the principal residence exemption.
In case your daughter is just not dwelling within the house with you, it won’t qualify as her principal residence, so it will likely be topic to capital positive factors tax for her sooner or later. That is one purpose to rethink the switch. It begs the query: Why switch the property to your daughter within the first place?
Probate charges paid upon demise
You might wish to switch the property to your daughter to keep away from probate charges in your demise. Nonetheless, probate charges, which permit your executor to distribute your property in accordance along with your will, will not be a big expense. It may vary from nothing to a most of 1.695%, relying on the province.
Choices aside from transferring the property
If she goes to purchase it from you so you could have money for retirement, that would make sense. You could possibly even give her or lend her among the cash to purchase it from you. In different phrases, if the property was value $500,000 and he or she gave you $100,000, you can take again a $400,000 mortgage for the steadiness.
