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Topic: Taxation

How will supplementary income through a home based business or as an independent contractor (real estate) help relieve tax pressure for the retired?

Answer:

Any supplementary income received from a home based business or as an independent contractor (real estate sales) does not necessarily relieve any tax pressure for the retired. One must assume, and the Canada Revenue Agency has the same view,  that such a business would be started for the purpose of increasing a taxpayer's income which, of course, is taxable under Canadian tax law.
 
While in the initial years of such a business, the taxpayer's allowable expenses may exceed income thus creating a business loss and reducing a taxpayer's taxable income, the Canada Revenue Agency often audits taxpayers who take perpetual annual losses on such businesses. Their policy is that when a taxpayer starts a business, there must be a reasonable expectation of profit for it to be recognized as a business for income tax reporting purposes. Taxpayers claiming perpetual annual losses from such ventures are often reassessed by CRA, disallowing the losses. A home based business that has annual losses consistently will often be viewed by CRA as a hobby rather than a business. We would caution against a venture of this nature as being reported as a business income source for income tax reporting purposes. It may come back to haunt you!
 
We hope this response is of some assistance to you..