Skip to main content Skip to search

Should You Continue Saving Taxes By Claiming Rental Or Business Losses?

Loss of one business can offset the profit of another owned by the same taxpayer. This may result in large tax savings. The loss may be even in a Rental Operation (RO).

The RO loss can offset the profit from any other source. RO losses do happen especially when interest rates are high.These rates are presently increasing and many ROs may start having losses.

Some taxpayers get fascinated from such tax savings. Consequently, they keep making these savings year-after -year. This fascination can continue till CRA triggers audits on such taxpayers.

Canada Revenue Agency (CRA) then issues re-assessments by denying a part or whole of their deductions. This is based on the law requiring businesses to have Reasonable Expectation of Profit (REOP). Consequently, CRA would ask back the savings they made plus the relevant penalties and taxes. This may be a huge amount.

However, CRA does give you the benefit of REOP in the initial years of business setup. Anyway, be aware of the damage that REOP may cause you. Use this information only under the guidance of a licensed and highly professional tax accountant.

By: H&T Accounting Service, a CPA firm.
This publication should be considered general information and not professional advice.