Taxes Advantages of Real Estate

Описание: Summary


In this episode of the Life by Design Podcast, Jessilyn and Brian Persson discuss the tax advantages associated with real estate investing. They emphasize the importance of understanding how to leverage personal residences, the concept of return of capital, and the significance of maintaining good bookkeeping to maximize deductions. The conversation highlights the need for consulting tax professionals to navigate the complexities of tax laws and strategies effectively.


 


Chapters


00:00 Understanding Tax Advantages in Real Estate Investing


07:04 Leveraging Personal Residence for Investment


09:50 Return of Capital and Tax Strategies


12:36 Maximizing Deductions and Bookkeeping for Rental Properties


 


Contact Jessilyn and Brian Persson | Weekend Wealth Investments: 

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Transcript


Jessilyn Persson (00:00)


Welcome to the Life by Design Podcast, where Jessilyn and Brian Persson, struggling to align your financial goals or confidently invest in real estate as a couple,


 


Brian Persson (00:18)


That's why we created this podcast and the Riches Relationships and Real Estate program to help you build wealth and strengthen your relationship. Visit weekendwealth.ca to take our quiz and discover your real estate investor type. Let's create the life you deserve together.


 


Jessilyn Persson (00:36)


In today's episode, we're discussing a few of the tax advantages you can access when it comes to real estate investing. For us, taxes are our number one household expense above our mortgage or any other category of expenses. In Canada, we would assert it is the same for everyone. So if you can reduce that expense via real estate and create an investment at the same time, you should definitely do so. First, a quick disclaimer. This episode is for informational purposes only and should not


 


be considered tax advice. The insights shared are based on our personal experiences and may not suit everyone's situation. We strongly encourage you to consult a qualified tax professional before making any financial decisions. So the first one we wanna chat about is your personal resident mortgage because most people are homeowners and they have a mortgage and their goal is to pay it down and be mortgage free. But as we've discussed in other episodes,


 


There are things you can do with that mortgage that will create an asset and passive income for you instead of just sitting on something that is considered a liability.


 


Brian Persson (01:46)


Yeah. And it's considered a liability because you're paying for it with after tax dollars. your renters are not paying for it. No one else is paying for that mortgage for you. So how do you turn your personal residence, your mortgage on your personal residence from a liability to an asset? Well, in Canada, the tax law allows you to borrow money and


 


put it into an investment which has the likelihood of creating cashflow. And when you borrow that money, you can write off the interest of what you've borrowed. So if you borrow money from your personal residence, i.e. your mortgage, then you can write off the interest of that mortgage when you invest it. So for us, we chose one of the simpler strategies just to keep our life simple.


 


And that is we, every once in a while, when the mortgage gets paid down enough, we will borrow a lump sum of money from our mortgage and we will put it into an investment. And that way we have a single transaction. have one borrowed chunk of money and we have one invested chunk of money. And it is very, very easy to keep that paper trail clean for the revenue agency. And if an audit comes our way, we have no problem with it.


 


Jessilyn Persson (03:06)


Right, so we, ⁓ just to maybe dig just a little bit deeper, we obviously have a house and a mortgage that we had originally anticipated paying down. We've shared this multiple times that we were, I think one, maybe two months shy of being mortgage free. Well, we decided we want to refinance. We're going to pull money out and buy another property or two in this case. ⁓ And so we pulled it out. We did a HELOC, so a home equity line of credit.


 


and we pulled a lump sum and bought a property. And like you said, keep the paper trails clear. And then we were able to write off the interest against the lump sum we borrowed. So anything that was still owing on our personal property, that was no write off. We still have mortgage payments for our personal portion of the property. the borrowed portion for an investment, to be clear, you can't borrow it and go buy a car. That's not not CRA improvement.


 


Brian Persson (04:04)


Yeah, exactly. You said ...