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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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  #1 (permalink)  
Old 11-11-2009, 11:25 PM
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Default Rental income in child support calculations?

In ontario, is gross rental income included in the calculation of child support?

ie: gross employment income 30,000
gross rental income 10,000

child support is then based on gross income of 40,000 dollars per year???
Can someone tell, me if this is correct? I tried the search feature but didnt really come up with much.
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Old 11-12-2009, 02:18 PM
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Default no answers?

Ok so 51 views but no responses, maybe i'm not providing enough info. My exwife is saying she wants a copy of my tax return for 2008. I dont have a problem with this as she's taken me to court every two years or so to try to get more support. The judge has always ruled that i've payed the proper guideline child support and i dont owe anymore support.

However, i lost my job in dec of 2007 and started a new lower paying job in 2008. I couldnt afford to stay in my house, so i rented it out. I now live with my gf of 10 years and we save some money by sharing the expenses on her home.

In the meantime thou i receive rent on my house ( which just pays the mortgage, property tax and insurance on it).

Do i owe more support to her because of the GROSS rental income even thou i do not NET any more from renting the house?

Any help here would really be appreciated, so i know what i'm getting into going forward.

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Old 11-12-2009, 03:22 PM
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From my reading, I think it should be included, as would any taxable investment income.

You DO net more from renting the house than you would from not renting it. Otherwise you would not be doing it. About 30% of the 10K gross is going to taxman, and another 10% to CS (assuming 1 child), and another 5% for increased utilities - you would still net 55%.

An option: I think this is legal, but not absolutely sure: You can charge LESS than the fair market rent, and not declare the rental income, and call it a 'cost splitting' arrangement i.e. you are stating that you are not intending to make a profit off the rental, but are just sharing costs with another person. The 'tenant' must NOT claim their 'rent' to obtain a tax credit, and you must NOT claim any 'rental expenses' to reduce your taxes. I know for sure you can do this with family members - not sure about strangers. The break-even point with the numbers above would be 6k gross rent (vs 10k). Not sure if it is really worth it though, given that CS would only be 10% of gross rent.

Last edited by dinkyface; 11-12-2009 at 04:22 PM.
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Old 11-12-2009, 04:26 PM
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Um, read your post again and realised that you are no longer living in your own house, so probably the cost splitting idea is no-go. I assume you are aware of tax rules regarding renting and selling non-principal residences?
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Old 11-13-2009, 10:14 AM
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Not sure. It would be fair if you only had to claim as income the profit from renting (minus mortgage, taxes, repairs, utilities) but I don't know how that would be done. I doubt the laws address it. Have you looked at case law?
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Old 11-14-2009, 03:17 PM
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51 views and no reply just means none of us has been through this before ourselves.

The house you own is both a long term investment, and it is a business. You have to split things in terms of buying the Capital Asset, paying Capital Repairs and paying Expenses.

As an investment, you have borrowed money to invest, and you are gradually paying off the loan. Rental income that is paying off the mortgage is reducing your debt, therefore it is money in your pocket, therefore it should be considered income. Paying the mortgage isn't an expense, it is the actual investement. This is your Capital Asset.

From a business point of view, what you spend on repairs should be an expense. Capital repairs are maintaining and increasing your investment, if you don't repair you lose money. Any renovations will probably improve your investment. If the house were vacant you would still have to repair the roof or you would lose thousands of dollars of value. This is a grey area that your ex could challenge if she wanted to but you are probably safe deducting this.

Utilities, I presume you pay and then rent the property with utilities included. This is an expense. If the property were idle the utilities would be negligable. Other expenses would be costs to rent it out, like advertising, and time spent managing the property which would include collecting rent, inspecting damage, hiring contractors and accounting and banking. You would have to show that this time actually cost you, for example if it had to be done during business hours and you took time off work to do it. Otherwise, the cost of hiring a property manager would be the equivalent.

So I would say the safest way would be to deduct everything but the mortgage payments and then you look like you are doing your best to be fair and honest.
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Old 11-14-2009, 04:45 PM
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Since you have been to court several times as your ex seeks to increase your CS, you must be aware that it is the number from line 150 from your tax return that is used to value CS.

That figure includes the net rental income, not the gross rental income.

When you changed the use of the property form a personal use (living there) to an investment use (renting it out), all the costs associated with running it (mortgage interest, property taxes, insurance, utilities, repairs and maintenance) become tax deductible where they weren't before.
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Old 08-21-2013, 10:05 PM
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Default Rental Income

I'm having the same issue with my STBX. She wants to include gross rental income for the CS calculation but line 150 as it should, includes net rental income. She doesn't want to understand the concept that there are expenses with rental properties. She sees only the cheque I pick up from the tenants and forgets there is a mortgage payment, taxes, repairs, and maintenance. I'm sure the family court judges will soon know us by name as I get served with some new application every week. In fact, we communicate more now than we did when we were together.
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Old 09-22-2016, 01:47 PM
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I can help shed some light on your situation as I have been through it regarding rental properties and CS.
Basically, your "current expenses" are allowed to be deducted from your rental income and either increase (rental profit) or decrease (rental loss). Ultimately increasing or decreasing your line 150.
Current expenses are allowed to be deducted from your income tax return and have an effect on child support payable as it effects line 150.
Capital expenses are allowed from a CRA prospective but cannot be used to lower your income in regard of CS.
The CRA produce a good reference guide as what makes up a Capital expense vs a Current expense.
If you own a rental property and pay CS you should definitely read this material.
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Old 09-22-2016, 02:28 PM
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Theres a line in the federal child support guidelines that discussed current income and line 150. The key element is "if line 150 is not a true indicator of your income use other proof" basically pay stubs etc.

My partner had a similar discussion with his lawyer who outlined what is taken out of line 150 and why line 150 doesnt work. Interest payments that fluctuate, payments that are not standard year to year etc are not technically supposed to be included. My partner gets interest income when he takes money out of his accounts for s7 school expenses and he had a payout of his rrsp when he lost his job. His lawyer told him those dont count which is why he has calculated based on his pay stubs.

Rental income is similar to self employed income and could be up for dispute. Many self employed people claim their income is significantly lower due to business costs. Theres a few cases on canlii. One that stood out to me was a truck driver who made $120,000 a year but claimed after expenses his income was $20,000. The judge disallowed his expenses.

As a former landlord myself, the taxable amount is reduced due to mortgage interest, insurance, utilities and costs associated with maintaining/renting. My rental income was reduced by that.

The onus is technically on her to claim this is additional income. If its becoming a serious issue you could have your renters pay your gf instead!
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