Do I claim rent in Ontario when the reported income clearly could never have covered it?

March 26, 2011 2:41 PM

I am filing tax returns for a number of prior years. One of those years was spent renting an apartment, but having almost no income whatsoever to claim. Rent was paid through a variety of means (read: help from parents). It was one of those years. Do I claim the rent paid?

This is in Ontario. Is the imbalance between income reported and rent claimed going to be a red flag of some sort? Does the fact that I'm on some landlord's books as having paid a certain amount mean that I should claim it, whether I'm able to show the income or not?

Would claiming rent with such little income on the year not be worthwhile anyway? I don't have the forms in front of me, but it seems that the provincial credits will add up regardless of the reported income, so we're potentially talking about a not insignificant sum. Given the option, though, I'd probably choose to take the simpler path and not mention the rent paid at all as long a this isn't omissive to a fault.

posted by tapesonthefloor to law & government (10 answers total)

This is not professional tax advice, but if you were writing the rent cheques (or whatever) yourself, you should definitely claim it. Your worry regarding the source of your income is moot because most gifts are not taxable in Canada, and the property tax credit makes it more than worthwhile (to the tune of $250+ per year). The simplest and most profitable path is to tell the truth on this one.

Another reason is this: if someone was paying rent, that someone should be claiming the credit.
posted by astrochimp at 3:44 PM on March 26, 2011

This is pretty normal for students and the recently unemployed living on their savings.
posted by jacquilynne at 3:56 PM on March 26, 2011

When I was in grad school in the US, there were times I didn't claim any income but paid rent. Thank you, student loans. I absolutely claimed rent paid, since I did pay rent. Absent actual tax advice from an accountant, if it were me, I would fill out the return honestly--which includes paying rent.
posted by J. Wilson at 5:23 PM on March 26, 2011

Yes. I claim my rent despite the fact that I receive money from my family every month that covers more than my rent amount, though historically it was only half my rent money. As long as you write the rent cheque, you're entitled to.
posted by hepta at 5:43 PM on March 26, 2011

This is specific to Ontario, where you can claim up to 20% of your rent for the year.

You should make sure to get a receipt from your landlord for payment for the year, as you will need it in the event of an audit. They don't really care who pays, so long as you are on the lease/the one living there.

If you have essentially zero income, and haven't paid any income taxes, you're not really in a position to get a benefit, however, as they're credits and non-refundable. See if you're able to roll them over til next year, in the event you have an income spike and need to offset some taxes owed.
posted by dflemingecon at 5:12 AM on March 27, 2011

I can't speak for Canada specifically, but usually when someone pays a bill for you, it is considered a gift of some kind, whether or not they write a check to you, or directly to the creditor.

I doubt any audit flags are going to pop up if the rent is low. If you claim to make $50k a year and have a $3000 a month rent payment, someone is going to notice. But $750 a month, and no other glaring outflows of money probably won't.
posted by gjc at 8:12 AM on March 27, 2011

"If you have essentially zero income, and haven't paid any income taxes, you're not really in a position to get a benefit, however, as they're credits and non-refundable."

This is incorrect. These credits are (a) refundable, (b) granted proportional to the rent you've paid (not your income), and (c) can't be rolled over.

If you've paid, say, $600 per month in rent, you'll get about a $400 credit which will be used to offset your taxes--or, if you have little to no income tax to offset, will be paid out in full in the form of Canadian dollars.
posted by astrochimp at 9:11 AM on March 27, 2011

(In other words, this applies even if you made precisely $0.00 in taxable income in the previous year: you'll still get a refund of about $400.)
posted by astrochimp at 9:15 AM on March 27, 2011

Also... straight from the horse's mouth regarding the property tax credit in 2010 (I couldn't find information for previous years). Note the words in bold:

"You may be eligible for the property tax component for 2010 if all of the following conditions apply:

...for 2010, rent or property tax on a principal residence (as defined below) was paid by or for you or you lived in a designated Ontario university, college or private school residence."
posted by astrochimp at 9:29 AM on March 27, 2011

These answers are all best, really. Thanks for being my sounding board, folks, and thanks to 'chimp for pulling the answer out of a site I thought I'd crawled quite thoroughly. I'll claim the rent, though I'll still feel strangely bad doing it.
posted by tapesonthefloor at 2:22 PM on March 28, 2011