For rental properties, Is principal taxable income?

Question

I am in Canada and I have some rental properties.
I want to ask if principal in mortgage payment should be counted as net-income or taxable income?

I always think the principal part of mortgage payment is tax free income. I should only pay tax if I have positive cash flow.

But my accountant told me that even my property break even with 0 cash-flow after mortgage payment. I still have principal as income, because only Interest is expense. So my principal become net-income and it is taxable. I can only claim depreciation to defer the tax.

Is it true? It is against my knowledge that equity & principal is tax free income. Please clarify. Thanks

Jordan

Answer 1

As per the other identical question you asked, yes, principal is income.

The renters are giving you money to pay the principal portion of each mortgage payment. It is income. The entire rent is income. From this you have deductions, such as your interest, condo fees, management fees, upkeep, etc.

Hope this helps.

Answer 2

sure, your accountant is sweet. The important component continues to be income. imagine about it for a minute: you're taking house income and directing it to a community (your loan fee) that will boost your fairness contained in the sources, so what reason could there be for the legislators to make that component exempt? you do not must have a loan on your sources; it is your determination of financing. activity is deductible, important isn't. you're properly desirable that you do not pay income tax each and each year on the higher cost of the sources itself, yet when the sources will boost in cost, there'll be a capital income once you promote the sources, it truly is protected on your income at 50%, and taxed at your marginal tax price. perhaps your confusion is from using the note important; you do not pay tax (capital efficient factors or in the different case) on the sale of your important position of abode.