What is smarter to do?

[mommy4ever]

OK looking at taxes, regardless of what I do I do have to pay a minimum of 2049$ for my pension. Whatever.

it's into my pension.

However, I'm in a position in life where I may have to consider getting a mortgage on my own in a the not so distant future. Typically I've used as many deductions(all legit) to minimize what I might have to pay in taxes. Now I'm rethinking that.

Would it make sense to pay a little more in taxes and have a tax assessment that shows a nicer income, as the banks will base it on my net income.

As to the deductions, they are mostly things we'd have to pay anyway, but since i work in the home, I'm permitted to deduct a portion of them, mortgage interest, utilities, cleaners, property tax. Regardless, we'd pay these things regardless. THere are expenses like the food for the kids, the toys that are costs for me, but the others cost the most and really reduce my net income on paper. Makes sense if you are looking to pay $0, but I am looking to the future too. I need to have the paperwork behind me to qualify for a mortgage.

I can really reduce it a lot but claiming it. I've always maximized that in order to pay less. Now I'm seeing perhaps it's not the best course of action.

I am contributing to RRSP this year as well to reduce taxable income, that doesn't reduce my net income though it's money for me in the future.

I don't know what to do. I'm only having to pay $400 in taxes at the full amount of income, over and about the pension payment. And my income remains at the higher end.

Is this the right way to do it? I hope I don't have to get my own mortgage, but there may be a need.

[elphie]

I'm really not sure how to answer this. My gut tells me that you shouldn't be paying a dime more in taxes than is absolutely necessary. Perhaps a meeting with a lender would help. They would be able to tell you what you would qualify for with both income figures and you could decide what to do from there. Good luck!

[itlw8]

I do not know about taXES IN cANADA but we have had this discussion with bankers and tax people in our childcare association meetings.

You need to take all the deductions you are entilted to take to lower your taxes.
When you go for a loan you need to go in with the paperwork to show them you know what you are talking about. Explain the deductions you qualify to take that lower your income but that you would have anyway even if you were not doing childcare. Your electric, trash , water, you would have those expenses even if you could not write them off, The portion of the rent or value of the home is another example.

They do want to see more documentation of the income you earn being self employed. I had to show 3 years of income.

Presenting a sound business plan goes a long way in getting a loan.

Some expenses you would not have such as food toys supplies to those would come off your income. Do make sure you are charging enough to cover all those expenses and still make a living wage.

[monkeywrangler71]

Your housing costs (principal, interest, property tax and heat) can not exceed 32% of your gross household income, and your total debt (mortgage, plus all loans including available credit) can not exceed 40% of your gross household income. Banks aren't looking at the net or taxable, just the gross.

If you look on your notice of assessment from last year, is your total income showing with the deductions already out? I know there is a space on the form for gross business income, but don't know if it is used in the calculation of your total income or not. If your 'total' income showing on your notice of assessment is not enough to meet the debt service ratio requirements, and it reflects the amount after your use of home deductions, you will need to bring in your T2125 to the bank and discuss how they will calculate your gross income. You should make an appointment to discuss this now, based on last year's return, so that they can advise you before your file your taxes for 08. It is, however, your right to reduce your taxes by any legal deduction available to you, so I can't imagine they would suggest otherwise.