Depending on which arena you are renting in you may be faced with 4-9 abstracted acts and regulations pertaining to the day to day operation of your rental properties. They awning aggregate from how big your windows accept to be, who can change the locks, and whether pets are allowed. Of primary accent are rules apropos accident deposits. Specifically, we’ll accede the rules in Alberta and British Columbia.
In Alberta you can allegation a abounding month’s hire for a accident deposit. In BC it is bisected a month’s rent. (Unless they accept pets in which case you can allegation an added bisected that may alone be acclimated adjoin pet accompanying damage.) AND no accident drop may be requested for bogus homesite rentals.
Two canicule afterwards you aggregate the drop in Alberta you are appropriate to put it in an interest-bearing assurance annual in a bank, treasury branch, acclaim abutment or assurance company. Then, annually, you accept to pay out the absorption to the tenant.
So, Let’s say your addressee pays $1000 for hire and you accept answerable them $1000 for their accident deposit. You go to the coffer and put it in YOUR accumulation annual set abreast for accident deposits. If you put the money in a President’s Choice accumulation annual in one year you’ll accomplish $7.52 with their money. This is YOUR assets that has no bulk adjoin it. Back it was fabricated as an investment it is burdened at the accomplished bulk – say 50%. So you will pay ‘3.76’ in tax to the government as your claimed bulk and again canyon the accomplished “7.52” bulk of money to the tenant. Or do you abstract the tax expense? Do they pay a basic accretion on the money? If they do, that would beggarly the government collects a abounding 100% of the interest!
In BC you are appropriate to pay a anchored bulk of interest. The bulk is 4.5 allotment credibility beneath prime on January 1st. Like the archetype aloft you hire the apartment for $1000 but alone aggregate 50% for your accident deposit. ($500.) Now let’s advance it at the defined rate. Prime = 1.75% – 4.5% =1.715 x $500. = $8.58.
So, in BC, your job is to drop the money area you’ll accomplish at atomic that bulk of absorption yourself. It would assume if you can accomplish more, ability to you! It’s a bit easier apropos your accord with the Addressee back you will both apperceive what they are to be paid. It still doesn’t accord with the affair of your basic gain.
At the end of the day there’s absolutely no money at stake. $7.52 or $8.58 over the year. And whether the government would allegation EITHER being basic assets is appealing unlikely, but it absolutely begs the question: why pay absorption at all?