Home Office Tax Deductions

One of the great virtues of starting a home business is the tax breaks you can claim. However, claiming aggressive write-offs is a sure way to attract CRA auditors. In this article, we'll look at some of the more popular home business write-offs as well as some tips on how you can legitimately claim them.

1. Keep business records
If you wish to claim tax deductibles on your home office expenses, you must get into the record-keeping mindset. You need to establish a means of keeping track of the money that is coming in and the money that is going out. Being audited is not the end of the world. However, being audited and not having the records to back up your deductions can be a nightmare.

The more detailed your accounts are, the easier it will be to face an audit. Compiling your daily reports into a monthly tracking sheet will drastically shorten the time it takes you to get your taxes together, and it will have the added benefit of providing a snapshot of your business month-to-month.

2. Write-off your workspace
Writing off a home office can be particularly attractive if you have a line of work that can be neatly confined to a dedicated room. You can still write off part of a shared room, but in either case, the space is calculated as a percentage of the total house or apartment area. That percentage is applied to all the related costs, including utilities, insurance, rent or mortgage payments and so on.

3. Update your business equipment
Office furniture, software, computers and other equipment are all 100% deductible within the year that the cost is incurred - you don't need to depreciate. There is an upper limit and the purchases must be majority-usage (primarily used) and necessary or helpful for business.

4. Business phone and internet
If chatting with clients is a necessary part of your business, it may be worth getting a second phone line or a dedicated business cell phone, as both of these are 100% deductible. If you only converse with clients occasionally, you can still write off the costs by noting the dates, times and reasons for the calls and then circling the items on your regular phone bill to deduct at tax time.

You can also deduct part of the cost of your internet if you use it for business. There is no absolute percentage to use, but it will be difficult to write off more than 50% if other members of your family are using it for non-business purposes. Be reasonable and pick a defensible percentage that you won't regret in the case of an audit.

5. Entertainment expenses
You can wine and dine clients (preferably paying or likely to pay clients) and get a tax break. The tendency for business owners at all levels to abuse this write-off has scared many home business owners away from claiming it. However, it is acceptable for you to take out a client for a meal and some entertainment. It will be easier to defend a $200 deduction for a client who has brought you a lot of business than the same meal for a buddy who paid you $20 for an hour's work over the entire fiscal year.

6. Take a trip, not a vacation
Have to hit the road to expand your market? Save your receipts. On business trips, your travel expenses are 100% deductible and your food expenses can be deducted at 50% of the total. Keep all of your receipts because even things like dry cleaning and tips are considered a necessary expense when you're out pounding the pavement in new markets.

7. Automobile expenses
When it comes to automobile expenses, you can claim registration, repairs, oil changes and gas. But it’s important you keep a log of the kilometres you are travelling for business on a daily basis, because you may need to prove how frequently you use your car for business.

8. Employ (not just pay) your family
You can use family members as employees and deduct their salaries as long as you account for their work and pay the going rate. If you have a business that lends itself to having a spouse and kids help out, then use that labour pool. You'll likely pay less than market rates for the help, and you can deduct insurance premiums for them as well.

9. Make justifiable deductions
Just because you have a home business doesn't mean you can go crazy with deductions. If you don't think you can face down an auditor with detailed proofs justifying the deduction, then perhaps it isn't a deduction you should be taking.

The CRA's T2125 form — Statement of Business or Professional Activities — needs to be filled out to claim these expenses. Page 3 of this form deals with the calculation of what is called business-use-of-home expenses.

Most tax software programs will let taxpayers claim home office expenses, although you may want to upgrade to a more expensive version that caters to the self-employed or small-business owners.

Working from home can result in big tax savings. But the rules are strict and the paperwork can be formidable. It might be wise for first-time claimants to seek the help of a professional.

How To Cancel A Credit Card Without Damaging Your Credit Score

The decision to cancel a credit card may be based on the desire to avoid excessive spending or if the terms of the card, such as annual fees or a high-interest rate, are no longer attractive.

While credit cards aren’t evil, they can be very dangerous. You need to be careful with the way you wield credit. If you’re not careful, you could do some real damage to your credit standing.

Be aware that cancelling a credit card may actually hurt your credit score. Part of your score is based on how much of your available credit you actually use; this is your credit utilization ratio. When you close a card, this ratio jumps because you’re using more of your valuable credit. And when this ratio jumps, your credit score goes down. (Also note that the longer you’ve had an account, the more you’ll affect your credit score by closing it.)

On the other hand, Too many open lines of credit can damage your account as well, which is why you should open new credit card accounts judiciously. Getting a 10% discount on your first purchase is probably no longer a good enough reason to open a new line of credit. Once you have at least one major credit card, you're not necessarily better off by opening a handful of store credit cards.

Cancelling a credit card is easy, but if you do it, do it right.

• Close just one account at a time, even if you’re closing several. First, cancel cards that charge you fees. Also, it’s better to cancel new cards before old ones. And you may want to keep cards with good rewards programs.
• Before you close an account, pay off your balance or transfer it elsewhere. If you try to cancel a card while it still has a balance on it, you might end up paying nasty fees and high-interest rates.
• Contact your credit card company. You can cancel some accounts online, which is convenient because often when you try to cancel by phone, the sales rep will do his best to talk you into staying. If this happens, be firm.
• Send written confirmation. Follow up by writing a letter to the card issuer.
• Watch your credit report. It may take several weeks for changes to appear on your credit report. It’s your responsibility to be sure the report is accurate, so keep tabs on it. You may also want to watch your credit score to see if cancelling the card did any damage.
• When you’re certain the account is closed, cut up your card.

There are many compelling arguments for closing credit card accounts. Doing so keeps you from abusing credit, reduces the risk of identity theft, and makes bookkeeping easier. Whether these factors outweigh the potential damage to your credit score is a call only you can make. The important thing is managing finances responsibly.

Helping Seniors to Enjoy the Holidays

Seniors often experience feelings of isolation and loneliness during the holidays. They may be remembering those dear to them who are no longer here or battling a long illness. Many seniors exhibit signs of increased anxiety or depression due to feeling overwhelmed. Holiday stress can also impact their physical and mental well being.

It is important to include your loved ones in the family holiday preparations to keep them active and involved. Here are some tips to help your elderly loved ones enjoy the holidays:

1. Plan ahead. Encourage the participation of your senior family members in planning both gift buying and holiday activities. Send your loved ones a list of possible gift ideas for other family members and friends and accompany them on a shopping excursion to select the perfect gifts.

2. Get them involved. Involving your senior family members in festive activities allows them to feel helpful and needed. When putting up your Christmas tree, have them help you with the ornaments, or work together on cooking a favourite or traditional holiday meal.

3. Link up with like minds.  Reach out to older relatives and friends who are alone and especially those who may share similar interests with your loved ones. Plan group activities like exercise, meals, games and trips to get them out of the house and expand their circle of friends.

4. Maintain a happy environment. Maintain brightness during these special festive days, despite the sense of loss they may have of loved ones who are no longer here to partake in the holiday with them.

5. Bring back happy memories. Seniors often find great joy in having someone show interest in them and their past. Help your senior family member feel loved and involved by going down memory lane. Go through your family photo albums, share old stories or watch old family movies together.

6. Create a senior-friendly environment. If you plan on taking your loved ones out to celebrate at another person's home, make sure the new environment is safe for them. Ask the host to remove slippery throw rugs and other items that could be hazardous or barriers to people who have difficulty walking.

7. Monitor their health condition. Make sure your loved ones adhere to their regular schedule of medications during the holiday hustle and bustle. If older family members tire easily or are vulnerable to over-stimulation, limit the activities or length of time they are included in the festivities. Consider planning a nap time or providing a "quiet room" where older family members can take a break from the noise and confusion.

8. Encourage social activities. If you live far away from your loved ones and cannot be with them for the full holiday season, try encouraging them to join a senior group in their area, or discuss the possibility of hiring an in-home companion or a helping hand. Not only will the companion be able to help with basic chores and activities but they will be able to provide much-needed social interaction for your loved ones on a regular basis.

9. Give them your time. Give your loved ones the gift they most want—your time and companionship. Seniors will typically relish in the seasonal gatherings. This is the time to have patience, compassion, and provide a safe and wonderful new memory for them to reflect back on throughout the coming year.

Mistakes to Avoid When Selling Your Home

Selling your home? Don’t let avoidable mistakes cut into your profits. Most people don’t sell homes for a living. The right real estate agent is a vital piece in the selling puzzle but ultimately it’s your home and your profit or your loss. Don’t let these common sellers' mistakes diminish your profits.

Mistake #1 -- Setting the Wrong Price for Your Property

Every seller obviously wants to get the most money for his or her home. Ironically, the best way to do this is not to list your home at an excessively high price. A high listing price will cause some prospective buyers to lose interest before even seeing your property. Also, it may lead other buyers to expect more than what you have to offer. As a result, overpriced properties tend to take an unusually long time to sell, and they end up being sold at a lower price.

Mistake #2 -- Mistaking Re-finance Appraisals for the Market Value

Unfortunately, a re-finance appraisal may have been stated at an untruthfully high price. Often, lenders estimate the value of your property to be higher than it actually is in order to encourage re-financing. The market value of your home could actually be lower. Your best bet is to ask your realtor for the most recent information regarding property sales in your neighbourhood. This will give you an up-to-date and factually accurate estimate of your property value.

Mistake #3 -- Failing to "Showcase"

In spite of how frequently this mistake is addressed and how simple it is to avoid, its prevalence is still widespread. When attempting to sell your home to prospective buyers, do not forget to make your home look as pleasant as possible. Make necessary repairs. Clean. Make sure everything functions and looks presentable. A poorly kept home in need of repairs will surely lower the selling price of your property and will even turn away some buyers.

Mistake #4 - Trying to "Hard Sell" While Showing

Buying a house is always an emotional and difficult decision. As a result, you should try to allow prospective buyers to comfortably examine your property. Don't try haggling or forcefully selling. Instead, be friendly and hospitable. A good idea would be to point out any subtle amenities and be receptive to questions.

Mistake #5 - Trying to Sell to Lookers

A prospective buyer who shows interest because of a "for sale" sign he saw may not really be interested in your property. Often buyers who do not come through a realtor are a good 6-9 months away from buying, and they are more interested in seeing what is out there than in actually making a purchase. They may still have to sell their house, or may not be able to afford a house yet. They may also be unsure as to whether or not they want to relocate.

Your realtor should be able to distinguish realistic potential buyers from mere lookers.

Realtors should usually find out a prospective buyer's savings, credit rating, and purchasing power in general. If your realtor fails to find out this pertinent information, you should do some investigating and questioning on your own. This will help you avoid wasting valuable time marketing towards the wrong people. If you have to do this work yourself, consider finding a new realtor.

Mistake #6 – Not understanding of Your Rights and Responsibilities

It is extremely important that you are well-informed of the details in your real estate contract. Real estate contracts are legally binding documents, and they can often be complex and confusing. Not being aware of the terms in your contract could cost you thousands for repairs and inspections. Know what you are responsible for before signing the contract. Can the property be sold "as is"? How will deed restrictions and local zoning laws affect your transaction? Not knowing the answers to these types of questions could end up costing you a considerable amount of money.

Mistake #7 - Signing a Contract with No Escape

Hopefully, you will have taken the time to choose the best realtor for you. But sometimes, as we all know, circumstances change. Perhaps you misjudged your realtor, or perhaps the realtor has other priorities on his or her mind. In any case, you should have the right to fire your agent. Also, you should have the right to select another agent of your choosing. Many real estate companies will simply replace an agent with another one, without consulting you. Be sure to have control over your situation before signing a real estate contract.

Mistake #8 - Limiting the Marketing and Advertising of the Property

There are two obvious marketing tools that nearly every seller uses: open houses and classified ads. Unfortunately, these two tools are rather ineffective. Less than 1% of homes are sold at open houses, and less than 3% are sold because of classified ads. In fact, realtors often use open houses to attract future prospects, not to sell the house.

Your realtor should employ a wide variety of marketing techniques. Your realtor should also be committed to selling your property. He or she should be available for every phone call from a prospective buyer. Most calls are received, and open houses are scheduled, during business hours, so make sure that your realtor is working on selling your home during these hours. Chances are that you have a job, too, so you may not be able to get in touch with many potential buyers.

Mistake #9 - Choosing the Wrong Realtor

Selling your home could be the most important financial transaction in your lifetime. As a result, it is extremely important that you select the realtor that is best for you. Experienced real estate agents often cost as much as brand new agents. Chances are that the experienced agent will be able to bring you a higher price in less time and with fewer hassles.

Take your time when selecting a real estate agent. Interview several agents and ask them key questions. If you want to make your selling experience the best it can be, it is crucial that you select the best agent for you.

SLOWER HOME SALES—BIG PRICE GAINS IN NOVEMBER

Contact me at kimlouie.net for a Free Home Value Report of your home!

KITCHENER-WATERLOO, ON (December 4, 2019) ––424 residential properties sold through the Multiple Listing System (MLS® System) of the Kitchener-Waterloo Association of REALTORS® (KWAR) in November, a decrease of 12.4 per cent compared to the same month last year.

Home sales in November included 265 detached (down 1.5 per cent), and 46 condominium apartments (down 28.1 per cent). Sales also included 75 townhouses (down 38.5 per cent) and 38 semi-detached homes (up 31 per cent). 

“Home sales were slower in November,” says Colleen Koehler, KWAR President. “However, looking at the last six months of activity combined, unit sales are up four per cent over last year, and trending above average,” says Koehler.

The average sale price of all residential properties sold in November increased by 18.7 per cent to $566,866 compared to November 2018. Detached homes sold for an average price of $660,071 an increase of 14.2 per cent compared to November of last year. During this same period, the average sale price for an apartment-style condominium was $342,561 for an increase of 13 per cent. Townhomes and semis sold for an average of $443,633 (up 22.4 per cent) and $431,635 (up 3.5 per cent) respectively.

The median price of all residential properties sold last month increased 17.6 per cent to $516,500 and the median price of a detached home during the same period increased by 14.7 per cent to $596,250.

The average days it took to sell a home in November was 27 days, which is one day less than it took in November 2018.

REALTORS® listed 432 residential properties in K-W and area last month, a decrease of 27.9 per cent compared to November of 2018, and a decrease of 17.5 per cent in comparison to the previous ten-year average for the month of November. The total number of homes available for sale in active status at the end of November totalled 553, a decrease of 34 per cent compared to November of last year, and well below the previous ten-year average of 1,252 listings for November. Months Supply of Homes for sale stood at 1.1 months in November, which is 35.3 percent lower than the same period last year. The previous ten-year average months supply of homes for November was 2.68.   

Koehler points to the number of new jobs being created and business investment in the area as factors contributing to the continuing state of demand for homes outpacing inventory.

“People moving to this area from other places is continuing to be a significant factor for our market. These buyers are selling wherever they are coming from and buying here, removing homes from the inventory but not putting anything in. This has pushed up prices by decreasing inventory while demand persists,” says Koehler. “Prices are increasing because homebuyer demand is exceeding the number of homes on the market—as we learned at our Housing Market Insight event last week—this trend will continue throughout 2020.”

Koehler believes the price growth we’re seeing in the Waterloo region is also an indication of the success of our local economy and the value consumers place on homeownership. She advises homebuyers and sellers work with a REALTOR® who is a member of the Kitchener-Waterloo Association of REALTORS® to help them navigate this highly competitive and complex real estate market.   

Historical Sales by Property Type

Months Supply of Homes for Sale

Historical Median Sales Price – By Property Type

Average Sales Price – By Property Type

Historical Sales – By Price Range

Average Days on Market

Understanding "Closing Costs" When Purchasing a Home

Contact me at www.kimlouie.net for a Free Home Value Report!


Closing costs — the list of charges that you need to pay to complete a real estate transaction — come as a surprise for many home buyers. Since closing costs are additional costs over and above the price of a home, you should budget at least 2.5% of the purchase price for closing costs, in addition to the down payment.

Your exact closing costs depend on where you live, how much you are borrowing, and how you are financing your mortgage.  The rules and regulations surrounding the various mortgage fees can be complex and can vary from lender to lender. 

Below you will find a brief explanation of these costs. Some of these fees may (or may not) apply to your specific situation. Use this is a guideline and then talk with your lawyer or real estate agent who can provide a more realistic estimate for your situation.

Home inspection fee: A professional inspection is a definite must for buyers purchasing properties for older than 5 years. A typical home inspection can cost anywhere from $300-$400, but that they are well worth the investment. Typically, a home inspection is not required if you are purchasing a new home.

Legal costs and Disbursements: A lawyer or notary will charge a fee for their professional services for work involving drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, title search, supplies. These fees usually cost between $600-$800.

Mortgage appraisal fees: Lenders usually require a professional appraisal of the market value of the property in order to process your loan. This could range from $100-$250. This may be waived depending on how you negotiate the mortgage with your lender.

Land survey fee or title insurance fee: A recent survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of a survey, most lenders today will accept Title Insurance, at a much lower price of approximately $225.

Land Transfer Tax: Most provinces charge a land transfer tax payable by the buyer. This tax, which is based on the purchase price, varies from province to province.

High ratio mortgage insurance: This is required if your down payment is less than 20%.

Fire Insurance: All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The cost can vary depending on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.

GST/HST is payable for newly constructed homes. Many builders include this cost in the purchase price so that the buyer does not have additional fees at closing. Therefore, on the offer, the purchase price will say "Plus GST" or "GST Included", and it will identify who will receive the new home GST rebate