rental income and T2

Only in S7 or in S7 and in S125 (same information).

if I put in S7 only not calculate tax and do not show any retained earnings in S50

tax rate also different rate

Please give me details answer

thanks


Answer

There is a difference between rental income and self-employed income.  Rental income is considered passive income; T2125 income is considered active income.  Rental income is ONLY on a worksheet (T776) with the end results transferred to line 126 on the T1.  You will note there is NO provision for "office in home" or "mileage"; you don't get to claim an "office in home" unless you have so many rental units that managing same (which will probably need to include maintenance) becomes a business, and you're not allowed to claim mileage for picking up the monthly rental cheque unless you have at least two units at different addresses.  The CRA Guide T4036 is very helpful in this regard.

Retained earnings only occur with corporations.  With sole props, it is ALL the income of the owner(s) for the relevant tax year, with no provision for tucking away company income to be handed out to the owner later.  There's no S50 that I can find for a T1 situation.  Also, active business income is taxed differently on a T2 than on a T2125; the T2 income is taxed at a lower rate than the same income on a T2125 (T1).  However, when the corporate owner withdraws funds from his corporation, the tax he pays over and above what the corporation has already paid should - if integration works - end up being about the same rate as if all were on a T1.

Can you be more specific about this?  I'd like to help if I can.

Jo H Ruelle  CPB

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