A great home renovation has two parts: what you see and what you don’t. Homeowners want beautiful design and function, and they need safe electrical systems behind their shiny new walls. The Electrical Safety Authority (ESA) and design expert Kimberley Seldon have joined forces for Power Your Reno – a new program to provide Ontarians with expert advice for renovations that are both stunning and safe, hosted at www.poweryourreno.ca.
“In 25 years as a designer, I’ve learned what’s behind your walls is just as important as what you put on them,” says Seldon. “Many of today’s hottest kitchen trends – coffee bars, super pantries, feature backsplashes – have electrical implications that are too often overlooked or considered late in the planning process. Not planning up front can mean big trouble and extra costs later.”
Electrical considerations are a must when it comes to planning a successful renovation project. Despite the fact that more than 25 per cent of electrical home fires are caused by faulty wiring and equipment, only 51 per cent of Ontarians are aware of the legal requirement to hire a Licensed Electrical Contractor (LEC).
Six top tips for powering a kitchen reno:
Kitchens are the most popular, complex, and often most expensive renovation project for homeowners. Many of today’s design trends have hidden electrical considerations.
- Don’t forget about the lighting plan
Although a detailed floor plan and elevations are vital, equally important is a lighting plan (which factors in electrical and switching requirements and helps avoid those ill-placed outlets and lighting controls). A proper plan will help you determine your electrical needs and assist in getting a specific, itemized quote from an LEC.
- Electrical requirements don’t have to be an eyesore
By law, there must be an outlet within 900 mm of any given point along your backsplash. To integrate outlets more seamlessly into your design, consider matching switches and outlets to your backsplash. Another option is a pop-up style outlet. An LEC can help identify the right outlets based on your design plan.
- Power your counter
Peninsula and fixed island counters that are not against a wall require outlets installed in the cabinet structure, which means you’ll have to accommodate for wiring – another reason why an electrical plan in the early stages of design is so important.
- Plan the perfect “appliance garage”
Receptacles enclosed within cabinetry – what is sometimes referred to as an “appliance garage” – will require a special interlocking switch that turns off the power when the door is closed. This will need to be considered for your “super pantry” or maybe even your coffee station if you are planning to have enclosed appliances.
- Make sure your electrical system can power your dream kitchen
The age and quality of your electrical could make or break your reno dream. All major appliances require a dedicated outlet. Adding hard-wired espresso machines, sub-zero fridges, televisions, double ovens, and other small appliances may require additional circuits and/or amperage.
- Hire an LEC
If you are hiring someone to do electrical work in your home, by law, it must be an LEC. That’s the case if you’re hiring someone directly, or if you are relying on your general contractor or designer to hire the subcontractors. Always ask for a certificate of inspection when the electrical work is complete for insurance and resale purposes, not to mention peace of mind.
From arming homeowners with more kitchen advice online and the right questions to ask when hiring an LEC, to providing advice on showcasing their space with the perfect lighting, Power Your Reno is a unique renovation resource that matches electrical tips with design inspiration.
Power Your Reno at the National Home Show on March 18
Homeowners who want to hear directly from Kimberley Seldon will have an opportunity to do so when she takes to the stage at 2 p.m. on March 18 as part of a panel discussion at the National Home Show in Toronto. Seldon and Steve Smith, a General Manager and electrical safety expert from ESA, will engage in an insightful Q&A session on the electrical implications of some of today’s most popular kitchen design trends.
About the Electrical Safety Authority (ESA)
The Electrical Safety Authority (ESA) is an administrative authority acting on behalf of the Government of Ontario with specific responsibilities under the Electricity Act and the Safety and Consumer Statutes Administration Act. ESA’s primary activities are: identifying and targeting leading causes of electrical safety risk; ensuring compliance with regulations; promoting awareness, education and training; and collaborating with stakeholders to improve the state of electrical safety in Ontario. More information can be found at www.esasafe.com
For further information:
Electrical Safety Authority Media Relations
905-712-7819 or Media.ESA@electricalsafety.on.ca
Article by Laura Gibbs
With the decline in the real estate market in the United States following the 2008 financial crisis, many Canadian residents have taken advantage of investing in U.S. real estate for income generation and/or personal vacation homes. This was especially advantageous for Canadians between 2010 and 2013, when the Canadian dollar was close in value to the U.S. dollar.
Many Canadian resident taxpayers fail to realize that the acquisition of U.S. property may result in income tax and other information reporting requirements in both Canada and the U.S. Further, if the property generates rental income, that income may be determined and treated differently in Canada and the U.S.
DETERMINATION OF RENTAL INCOME
Canadian capital cost allowance vs. U.S. depreciation
Since the purchase of capital property (in this case, the land and building of a rental unit) may not be “written off” in the year it is purchased, the cost must be capitalized and depreciated over time. The method and rate of depreciation differ between the two countries such that significantly different results may be reached both on an annual basis and when the property is sold.
In Canada, a rental loss is often fully deductible, whereas in many cases a rental loss realized in the U.S. will not be deductible against other sources of income. The inability to claim these rental losses in the U.S. when incurred is partially mitigated by having these suspended losses applied against any gain realized on the sale of the property.
Additionally, tax depreciation in Canada is discretionary and may not be used to create or increase a rental loss, whereas depreciation is mandatory in the U.S and, if not claimed, it will be deemed to have been claimed. This treatment results in a reduction of the cost of the property for U.S. tax purposes without a corresponding deduction for the depreciation claimed. When the property is sold, the gain recognized will be higher due to the depreciation claims without a corresponding increase in the suspended losses to apply against it.
Limitation on certain expenses
While most deductible rental expenses are claimable on both Canadian and U.S. tax returns, certain expenditures are subject to different rules in the U.S.
Repairs and maintenance
The Internal Revenue Service (IRS) issued guidance, known as the tangible property regulations (effective January 1, 2014), to clarify whether certain materials, supplies and repairs and maintenance were deductible or whether capitalization was necessary. Under these regulations, items that would be eligible to be expensed in Canada might be required to be capitalized in the U.S. unless the taxpayer is eligible for certain exceptions, two of the most common being those for small expenditures and small taxpayers.
There are additional exceptions and other determinations for capitalization that should be discussed with your Collins Barrow advisor.
Mortgage interest and property taxes
If your [D1] U.S. rental property is also a vacation home (defined as a property that is used personally for the greater of 14 days or 10 per cent of the total days it was rented to others in the tax year), the expenses incurred should be allocated proportionately by dividing the number of days the property was rented by the number of days the property was used (rented and personally).
In contrast, mortgage interest and property taxes are calculated by dividing the number of rental days by the number of days in the year, often resulting in a deductible portion that is less than in Canada.
If you paid a U.S. person at least USD $600 in connection with your U.S. rental property, you may be required to file Form 1099-MISC with the Internal Revenue Service. The form must be filed for each person to whom you have paid at least $600 for services (including parts and materials) in connection with the property. The payments must have been made by payment other than credit card to an unincorporated entity.
For example, suppose you hire a landscaper to mow the lawn of your U.S. rental property, and you pay this self-employed individual in cash more than $600 during the year. You will be required to file Form 1099-MISC to report the amounts paid to the landscaper and you will need to obtain the landscaper’s U.S. Social Security Number for reporting purposes.
The due date for filing this form with the IRS for the 2015 tax year is February 29, 2016, or March 31, 2016 if filing electronically. The due date for the filing of these forms in connection with the 2016 taxation year will be January 31, 2017.
In Canada, ownership of revenue-generating property in the U.S. is subject to reporting on form T1135 if your share of the cost of the property (when added to the cost of all other reportable foreign property) is CAD $100,000 or more.
Selling your U.S. real property
With the recent decline in the Canadian dollar against the U.S. dollar, many Canadians are selling or thinking of selling their U.S. properties (rental or otherwise). The U.S. dollar proceeds, when converted to Canadian funds, may be higher due to changes in the foreign exchange rate, even though they may be selling for less in U.S. dollars.
For example, suppose you purchased U.S. property for $400,000 in 2012 when the average exchange rate was 1.00. Your cost for both Canadian and U.S. purposes is, therefore, $400,000. If the property is sold for USD $350,000 on, say, December 31, 2015, when the exchange rate was 1.384, the Canadian equivalent of the proceeds is $484,400. In the U.S. you realize an economic loss of $50,000 and pay no tax. In Canada, however, you actually have a capital gain of $84,400 with no foreign tax credits to offset the Canadian tax that may be payable.
Further implications for nonresident aliens
If you acquire a property in the U.S. as a nonresident alien and the property is used to generate rental income, you will likely be required to file a U.S. Nonresident Alien Income Tax Return (US1040NR), and possibly a state income tax return, to report these rental activities.
Generally, rental income earned in the U.S. will be subject to a 30 per cent withholding based on the gross rents collected unless an election to have the income treated as “effectively connected” with a U.S. trade or business is made. This election should be made with the first income tax return filed, and will permit any income arising to be taxed on a net basis (net of expenses) at graduated rates.
In order to file, you will need to obtain a U.S. Individual Taxpayer Identification Number (ITIN). This application often is made with the first federal income tax return filed.
Tax withholdings on disposition
There are also withholding requirements for non-U.S. persons on the disposition of real property under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). Unless certain exceptions are met, the Act requires the purchaser to withhold 15 per cent of the proceeds and remit them to the IRS (prior to February 16, 2016, the withholding tax rate was 10 per cent). The withholding may be claimed on your U.S. tax return when you report the disposition.
An application to reduce or eliminate the amount of tax withheld may be made by filing Form 8288-B within certain time constraints. Additionally, many states (e.g. Hawaii) have similar withholding requirements on the disposition of real property. Many of these states have provisions reducing the amount to be withheld, similar to those under FIRPTA.
For more information on FIRPTA, please refer to the Collins Barrow U.S. Tax Alert “U.S. Real Estate Issues,” and contact your Collins Barrow advisor.
Long-term stays in the United States
In June 2013, the Senate passed the JOLT (Jobs Originated through Launching Travel) Act of 2013, which essentially permits Canadian retirees to stay in the U.S. for up to 240 days without a travel visa. Previously, the limitation was 182 days.
What does this have to do with taxes?
If you spend more than 182 days in the U.S. in any one year, the U.S. will likely consider you a resident for tax purposes and therefore subject to U.S. income tax on your worldwide income unless relief is granted under the Canada–U.S. Tax Treaty. State filing requirements may also exist.
This consideration may also result in other U.S. filing obligations, including the requirement to file FinCEN Form 114 “Foreign Bank Account Reporting” (FBAR), which carries a penalty of $10,000 for each account not reported in a timely manner. Generally, no treaty relief is available should these obligations arise.
Additionally, if you are outside your province of residence for an extended period, entitlement to certain provincial health coverages may be affected.
The U.S. determination of residency is not limited to 183 days in the current year. An additional “substantial presence” test may apply should you spend a significant amount of time in the U.S. each year. If you are considered a resident under this test, you may be required to file Form 8840, Closer Connection Exception Statement. Please refer to the Collins Barrow U.S. Tax Alert “Snowbirds and the Closer Connection Exception” for more information on the substantial presence test and Form 8840.
These are just a few of the complexities Canadians face when owning U.S. real property.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
EDMONTON _ The manager for Uber in Alberta says the ride-sharing app will cease operating in the province on Tuesday unless the provincial government makes insurance and licensing changes.
Ramit Kar told a demonstration of about 150 Uber supporters on the steps of the Alberta legislature on Saturday that the government must allow flexibility on requirements that drivers have commercial licences.
He says the province must also approve a ride-sharing insurance product that Uber has obtained from a private insurer.
Uber wants the changes in order to satisfy requirements passed by Edmonton Council that take effect on March 1.
Under the Edmonton bylaw, Uber drivers must carry provincially approved insurance, have an annual vehicle inspection and agree to a criminal record check.
Kar says without action by the province by Tuesday, thousands of people will be affected.
“We hope that the voice this group and the many voices they represent are heard by the province and that we see action soon,” Kar told cheering supporters, many of whom were Uber drivers.
“We hope to continue to see you on the road.”
A spokesperson for Alberta Transportation Minister Brian Mason said in an emailed statement on Saturday that the government is dealing with several issues, including licensing and insurance, and wants to address all the issues at once rather than in a piecemeal fashion
“We are committed to finding an appropriate solution allowing ride share companies to operate in a fair manner, while also protecting drivers, passengers, and other road users,” Aileen Machell said.
Calgary city council has also passed a ride-sharing bylaw which could take effect in April, but officials with Uber have said those rules are too strict.
Calgary’s bylaw requires ride-sharing drivers to have a Class 4 driver’s licence a commercial licence. It also requires an annual $220 operating licence from the city, regular inspections, proof of eligibility to work in Canada and a police background check.
Several Uber drivers addressed the rally in Edmonton, saying the service gives them jobs and provides users with safe rides.
But Isack Isack, an Edmonton taxi driver who observed the rally and challenged Kar when he took media questions, said a commercial licence is important for anyone carrying passengers for money. Medical requirements for drivers, he noted, are more stringent with a commercial licence.
“They’re carrying other people,” Isack said to Kar.
Kar said Uber drivers are driving their personal cars, and that it’s no different than carpooling. He said Uber has proposed a number of options to the province for getting around the requirements of a commercial licence.
“A Corolla is a Corollla is a Corolla no matter which way you look at it,” Kar said.