Well. Tax season is officially open! Accurately navigating tax rules can be tricky – especially if
you own a cottage. It’s always a good idea to consult with a qualified tax accountant to ensure
you’re aware of recent changes. There a few specific tax considerations you’ll want to keep in
mind this year.
- New Trust Reporting Rules
- Underused Housing Tax
- Cottage Rental Tax
Cottage ownership through a trust…
Many folks own their cottages through a trust – used by parents to pass the cottage down to their kids. Two common trusts are a “family discretionary trust” (a means of providing creditor protection and deferring capital gains tax) and a “bare trust” (parents go on title and the mortgage but financial responsibility over the cottage is up to the kids.) Effective October 27, 2023, both will require more paperwork than ever!
Underused Housing Tax…
The concept of the “Vacancy Tax” is not new. Since January 1, 2022 the Feds levied a 1% tax on the ownership of residential properties owner-occupied for less than 180 days per year. What’s new are some nuances for cottage owners who must now file a UHT return by April 30th. You’ll want to do your homework on this one!
Cottage Rental Tax…
The explosion of cottage rentals since Covid helped owners cover their mortgage and operating costs. The CRA has clamped down on that extra revenue and now, you’ve got to pay tax on it! Granted, you can also claim insurance, repairs, internet, etc., but they better be legitimate and accurately recorded expenses. The tax man will be watching!
For more info, check out Andrew Cruickshank’s article for more details here:
