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Real
Estate -> Is rental income property or business income?
Rental income from real property for
an individual or partnership will either be property income or business
income for tax purposes.
In general, the number and kinds of service provided in
relation to the rental of the property will determine whether the income
is property or business income. The more services that are provided,
the more likely that the income will be considered business income.
The number of rental properties being managed will not affect the
classification of the income. For more detailed information,
see the Canada Revenue Agency (CRA) Interpretation Bulletin IT-434
Rental of Real Property by Individual.
Why does it matter?
Property income and business income are treated
differently for tax purposes. The following are some of
the differences.
Business income
Property income
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from real estate rentals is reported on line 126 of the tax return. |
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is not subject to CPP premiums. |
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is not included in working income
for the working income tax benefit (WITB). |
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is not included in self-employment
income for calculation of the refundable medical expense
supplement. |
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is not included in earned income
for purposes of calculating the child care expense deduction. |
One other important difference is that when the rental
income is considered business income*, the filing due
date for the individual and for their spouse is June
15th. The due date for other individuals is April 30th.
* other
than a business whose expenditures are primarily in connection with a tax
shelter
See the following CRA publications:
When you are using our Canadian
Tax Calculator, business income should be entered as income from
self-employment. Property income should be entered as other income.
Revised: July 19, 2010
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