Analysis considering tax on rental income and HELOC financing

Investor · Ottawa Ontario, Canada · Member since 2019 · 28 posts · 3 votes

hi guys, for the investors in Canada I noticed that the rental calculators do not consider 1) tax on rental income and 2) financing costs for HELOC (Home Equity Line of Credit) even if they are tax deductible ? Anyone have experience on how these should be considered during the analysis phase ?

Thanks,

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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
7y
@Khurram Mirza

1) I suppose you mean income tax instead of property tax.
Everyone's tax situation is different. As such, it would be difficult to add that into the calculations.
Some people are in a very low income tax bracket. Some people are in a high income tax bracket. Some people live in a no income tax state. Some people live in a high income tax state. Some people have to consider foreign taxes.

2)financing costs for a HELOC from a cash-flow perspective is an cash-outflow.
From a tax perspective, you want to see if some of the upfront costs should be capitalized.
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Chris Habets
Investor · Ottawa, Ontario · Member since 2017 · 145 posts · 52 votes
7y
@Basit Siddiqi's advice is generally correct, but from a Canadian perspective:
I've been working on an "Investment Chooser" calculator that takes into account current and future income tax rates. This one requires that you know your (assumed) returns from a property, your RRSP, TFSA, other investment, etc.
My own spreadsheets take into account HELOC (or other borrowing) rates, but does not take into account the additional tax deductions you get from them.
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