Interview with Annie Duchesne, real estate financial planner
Seven years ago, I met a property owner baffled by a lack of funds. After analyzing his file, I could see that he had everything he needed to make the right management decisions with his associate. How can this problem be solved?
He had already met over 10 professionals with no results, and we met over 25 others after our meeting. It took 7 years for us to be able to draw up a conclusion from the solutions they suggested…
This problem usually occurs around the 15th year, when the interest paid on the mortgage and a decrease in the possible capital cost allowance cross paths. This causes a decrease in the tax-deductible interest and in the tax-deductible allowance.
The end result is a significant increase in tax payable, which causes a decrease in net income! Thus, the property owner feels like they are losing money!
How to Avoid This Situation?
The owner will consider their options like selling or refinancing one or more of their properties to pay their taxes. However, selling a property leads to more tax payable (capital gain and recaptured depreciation), and refinancing it to pay taxes may turn your deductible interest into non-deductible interest. You must find better solutions!
By consulting a good financial planner, a tax specialist, or an accountant who specializes in real estate, you can save big!