As the dust is settling on the major changes to the mortgage qualifying rate and it is back to work as usual, some Canadians are starting to realize that there were some other significant changes that affect us all.
Starting this year you must now declare which property is your principal residence. There will be a form with your tax return that you must fill out. The purpose of this of course is to make sure that the house flippers of the world pay their fair share of income tax on monies earned by buying and selling homes. This will also affect foreign owners, when they sell property in Canada, even though a family member may have lived in it, they will now pay capital gains. They are closing some rather large loopholes in the system where many people have taken unfair advantage.
Another point that was probably missed by most is that if you have a home with a legal suite, when you sell the home you will have to pay capital gains on the portion that is rental. Many of these suites collect rent that is never reported to CRA and people avoid taxes by just pocketing the money. For many years now if you collected rent but didn’t report it on your taxes then you were not allowed to use it as income to apply for a mortgage.
This may also open up another legal/accounting question for parents that co-sign on their children’s mortgages. In Alberta at least when you co-sign you are usually on the mortgage and on title. Will it mean that when that home is sold will there be legal and tax ramifications when the home is sold.
***This article was written by Len Lane, part of DLC Brokers for Life based in Edmonton, AB.***
If you are like most people, then you have lots of unanswered questions. I’d be more than happy to answer your questions. Give me a call and I’ll be able to shed light on these gray areas and remember, as your mortgage broker I am here to save you money and get you on the right path to financial freedom.