Tax Breaks For Landlords

A group of Canadian realtors is calling on Federal Finance Minister Jim Flaherty to extend capital gains tax relief to small landlords, saying the move will level the taxation playing field and encourage property owners to update and maintain rental housing.
The Canadian Real Estate Association, which represents 88,000 full-service realtors, is asking Mr. Flaherty to allow landlords with smaller holdings and fewer than five employees to defer capital gains and capital cost allowance taxes when they sell their investment property, provided they put that money into another investment property within a year.
The Conservative government campaign included a pledge to provide individuals and companies with the ability to defer capital gains taxes by allowing them to reinvest proceeds within a certain time frame. Prime Minister Stephen Harper spoke of introducing rollovers for shares, bonds, mutual funds and family cottages. He did not, however, mention small investment properties.
Mr. Flaherty is slated to unveil his economic plan today and he is expected to signal the need for more personal and business tax cuts to help preserve Canada's living standards.
CREA does not expect the minister will unveil any measures related to small real estate investors Thursday, but is nevertheless forging ahead, trying to secure meetings with Mr. Flaherty's office and other members of parliament. They have been calling for similar measures since 2001.
"The Conservative government said they were going to address capital gains tax," said James Brennan, a spokesman for the CREA. "They left the door open to deal with the issue of capital gains tax as a whole."
In a paper submitted to the House of Commons Standing Committee on Finance last month, CREA said their proposed changes to the tax legislation would alleviate current inequities that place small real estate investors at a "significant disadvantage" when compared with many other investment vehicles.
"The Income Tax Act effectively eliminates the incentive for many property holders to consider a sale due to the impending tax burden," the paper said. "The situation is particularly punitive for the small investor" who manages property but is denied the tax benefits given to larger investors because they have less than five employees.
The CREA also said that small investors are currently holding onto their investment properties to avoid the tax hit that would arise from selling and re-investing. The high taxes preventing reinvestment in income property are stunting Canada's productivity and labour mobility.
"Households can now move their belongings, stocks and bonds, but are unable to move their real property investments without facing substantial tax consequences," the CREA said.
The economic spinoffs of having a real estate transaction take place are notable, Mr. Brennan said, since most renovations take place around the time a property is bought or sold