If you are self-employed, securing a great mortgage can be more complex.

The most straightforward way to qualify for a mortgage as a self-employed individual is for the lender to look at the income on your Canada Revenue Agency notice of assessment for the past two years and see if you qualify for a loan in much the same way as an employee would.

“The first thing I make sure is that the tax filings and financial statements are in order so we can see the track record of their earnings,” says Rob Regan-Pollock, senior consultant at Invis mortgage brokerage in Vancouver. “If the last two years of earnings are sufficient to qualify for the mortgage that they’re looking to take out, then they are a regular-income-qualified file and can put as little as 5%down.”

Insurers such as the Canada Mortgage and Housing Corp. (CMHC) will allow self-employed individuals to increase the income on their notice of assessment by 15% for the purposes of mortgage qualification. This is a generally accepted increase to compensate for non-cash items such as business use of the home.

Their website gives a full rundown of the requirements for self-employed borrowers cmhc-schl.gc.ca/en/hoficlincl/moloin/hopr/upload/CMHC-Self-Employed.pdf.”Consistency in income is your best bet [in order to secure a mortgage],” says Carol Bezaire, vice-president, tax and estate planning, at Mackenzie Financial in Toronto. “If you are thinking about going for a mortgage, make sure that over the last two or three years you are consistent in how much income you are bringing in.”

In order to determine your income, CMHC will average your income from the past two years, but if your income has been rising each year for the past four years or more, they will use the most recent year for their calculations.

However, in order to take advantage of certain tax strategies, many self-employed individuals may keep money in their business rather than generating income. If you are unable to qualify based on your verifiable income you can still obtain insured mortgage finance, but CMHC will charge you a higher premium. Since April this year, CMHC only permits you to state your own income if you have been in business for less than three years.

Ranjit Dhaliwal, a mortgage broker with Mortgage Intelligence in Brampton encourages clients to register their business, as the licence or article of incorporation can show if they have been in operation for less than three years.

Mr. Dhaliwal says to get the best rates when stating your own income, many lenders will be looking for mortgage loan insurance unless you can put down a deposit of more than 35%.

The insurers also recommend that lenders demand higher minimum credit scores from borrowers stating their own incomes.

“It’s absolutely essential that they have a good credit score,” says Mr. Dhaliwal. “Self-employed individuals tend to have higher balances on their credit cards, lines of credit and so on because they are using that for their business. If they’re planning on purchasing a house or refinancing a house, maybe bring these balances down a few months before going to see a mortgage broker.”

The early years of self-employment can be a time of financial uncertainty while you establish your business and build up a reputation with customers.

Financial advisors say look before you leap into anymore debt at this time.

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Many taxpayers overpay their taxes simply because they fail to claim some of the common deductions and credits they are entitled to. As a homeowner, there are several home tax deductions and credits that you can claim.

Before you submit your next return, check the following list. It represents the most frequently over-looked tax breaks available to typical working Canadians.

First-time home buyer’s tax credit
If you are buying a home for the first time, you can claim a non-refundable tax credit of up to $750. This new non-refundable tax credit is based on a percentage of $5,000. You or your spouse or common-law partner can claim the home buyer’s tax credit.

GST/HST tax rebate (new housing rebate)
If you buy a new home as your principal residence, and if it’s less than $450,000, you may be able to claim the GST/HST new housing rebate too. Ontario and B.C. residents may also claim the provincial portion of the HST if they buy, build or do a major renovation on their principal residence. Other home tax deductions exist for homes that are built by the owner as well as for residential rental properties.

Home Buyer’s Plan
The Home Buyer’s Plan allows you to withdraw up to $25,000 from your registered retirement savings plan (RRSP) to help with the purchase or construction of a home. Certain conditions apply. Submit a request by completing the T1036 tax form that is available.

Medical expenses tax credit
Persons with mobility impairments can claim renovation expenses to make their home more accessible under medical expenses deductions in Canada. The government provides an extensive list of eligible medical expenses as well as medical expenses that you cannot claim. 

Moving expenses
If you move within Canada, your moving expenses might be an allowable tax deductible. You must be employed, and your new location must be at least 40 kilometres closer to your place of work. Starting a business would qualify, as would moving away from home to take your first job. If the deductions are greater than earned income, they can be carried forward for one year to realize the full tax benefit.

Expenses that can be claimed include hiring movers or renting a van to move yourself, breaking a lease, furniture storage, meals and lodging for you and your family while traveling and legal fees and real estate commissions if you have to sell your home.

Work from home expenses
If you are using your house as part of your business — a home office for example — you can claim a deduction for that part of the home that is used to conduct business activities. If you are a homeowner you can claim a portion of your mortgage interest, property taxes and capital cost allowance. If you are a renter you can claim a portion of your monthly rent. You can include in your deduction a share of the utilities, insurance or home maintenance allotted to the area of the house set aside for business use. For each of these expenses you can claim a percentage equal to the percentage of your home that is reserved for business.

You can’t use these items to create a loss that could be deducted against other sources of income, however. Of course, any expenses solely related to the business, such as supplies, travel and client entertainment, are fully deductible. CRA forms T2124 and T2032 contain a guide entitled “Calculation of Business-Use-of-Home Expenses” that will help you calculate your allowable claim.

Rental income
If you rent a property you own or that you have use of, use the T776 tax form to report rental income and claim allowable expenses such as advertising, insurance and interest on money you borrow to buy or improve the property.

Child care tax credit
In most cases, child care expenses for an eligible child must be claimed by the parent with the lower net income for tax purposes.  If parents are separated and share custody, each parent may usually claim a portion of the child care costs.  Where a medical doctor certifies in writing that the lower-income spouse is incapable of caring for the child due to a physical or mental infirmity, the costs may be claimed by the higher income spouse.

Eligible child care expenses include day-care centres and day nursery schools, some individuals providing child care services, day camps and day sports schools, educational institutions such as private schools (the portion of tuition costs relating to child care services), boarding schools, and overnight sports schools and camps.

Provincial credits
Manitoba homeowners benefit from two other home tax credits: the Education Property tax credit and the School Tax Credit for homeowners. In Ontario, homeowners can apply for the Ontario property tax credit and the Senior Homeowner’s Property tax credit.  For more information, please consult the CRA website
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The new site is now more user-friendly, accessible, and more functional while continuing to provide helpful information regarding the City of Barrie.

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