In your case, although, Parmod, there’s no tax to switch your private home to your company assuming it qualifies as your principal residence for all years of possession. The true query is: must you?
Self-employed? How you can file your taxes
Personally using a company asset
As you’ve famous, it’s possible you’ll must pay lease to the company after the switch. The rationale: In the event you use a company asset for private use, you both must pay for that utilization, or embrace a taxable profit in your private earnings for the 12 months.
Within the case of actual property, paying the company could be primarily based on honest market worth for lease. The lease could be thought-about taxable earnings to the company with a tax charge of round 50% (the speed varies by province and territory).
In the event you didn’t pay lease, otherwise you paid beneath honest market worth, it’s possible you’ll want so as to add a taxable profit to your T4 slip. You’ll should report that profit as employment earnings, triggering private tax.
Attributable to shareholder
In the event you switch an asset to an organization, the company owes you cash in return. In the event you switch $1,000 to your company checking account out of your private checking account, for instance, the company typically owes you again that quantity tax-free.
The identical might apply for those who switch a $1 million asset like your private home to an organization. The company might then owe you $1 million tax-free. This may be an choice to take money out of an organization as a substitute of promoting a private asset you want to preserve.
Principal residence exemption: private vs. company
The principal residence exemption could be claimed by a person taxpayer in Canada, however not an organization. So, proudly owning your private home in your company, Parmod, will give rise to future capital positive factors tax.
The inclusion charge for capital positive factors is ready to extend from one-half to two-thirds primarily based on the 2024 federal price range, although this alteration just isn’t but enacted into legislation. As soon as it has been, it could trigger the tax charge on a company capital acquire to rise from about 25% to about 33%, although it could possibly be barely decrease or larger relying on the company’s province of residence.