Making the Most of the Principal Residence Exemption

Canadians don’t have to pay capital gains taxes on their principal residences. However, the definition of “principal residence” is quite flexible making it possible for families who own a second property, such as a cottage, to save substantial amounts on their taxes.

Douglas Gray and John Budd, in their book The Canadian Guide to Will and Estate Planning, explain that your principal residence isn’t necessarily your “main place of residence.” If you own a vacation property, “as long as you, your spouse or at least one of your children occupy the vacation property for some period or periods of time during the year, that is enough to bring you within the principal residence definition.”

“The fact that you show your home address on your income tax return does not mean that you are designating your house as your principal residence.” Further, “it is not generally necessary for you to decide which property is to be designated as the principal residence for capital gains tax purposes until the year that either property is sold or disposed of.”

Calculating your taxes owing on a property sale begins in the usual way by taking the proceeds of disposition and subtracting your adjusted cost base to get the capital gains amount. Then you get to reduce this capital gains amount by the “exemption fraction,” which is based on the number of years it was your principal residence. The exemption fraction is

1 + number of years after 1971 the property is designated as your principal residence

divided by

number of years after 1971 you owned the property.

Partial years count as full years in this fraction. The purpose of the “1+” in the numerator is presumably to deal with the fact that a family with just one property may move in the middle of the year, but only be allowed to designate one of their homes as their principal residence for that year.

An Example

Sue and Bob bought their home in 1994 and a cottage in 2004. They sold both in 2013 for a $200,000 gain on the house and a $150,000 gain on the cottage. They owned the house for 20 years and the cottage for 10 years.

If they designate the house as their principal residence for the entire 20 years, they will have to pay capital gains taxes on the cottage gain of $150,000. But, look at what happens if they designate the cottage as their principal residence for 9 years and the house for 11 years:

Cottage exemption fraction = (1 + 9)/10 = 100%.

House exemption fraction = (1 + 11)/20 = 60%.

Now the cottage gain is entirely tax-free and they only have to pay capital gains taxes on 40% of the $200,000 house gain, or $80,000. This is a reduction in capital gains of $70,000 compared to declaring the house as their principal residence for the entire 20 years. Assuming Sue and Bob pay 23% capital gains taxes, they save $16,100.

For families with vacation properties, it definitely pays to understand these rules when it comes time to sell homes and cottages.

I am not a tax expert. I relied on the information in Gray and Budd’s book to construct this example. Seek professional tax advice, particularly when dealing with large sums of money.

Continue reading →

The Importance of Dog Daycare

When you work all day it is hard to know what to do with your dog. You could leave him in a crate or enclosed in a room in your house but is this really fair on the dog. The majority of people work nine till five or longer, therefore your dog is left for at least eight hours on its own. This can cause boredom, isolation, behavioural problems and even depression, not to mention that they can’t hold the toilet for that amount of time. This means you will come home to a lot of mess in your house and also this is extremely uncomfortable for your dog and could cause bladder problems. The best solution for your dog if you are out at work all day is dog daycare, this is a new phenomenon where people are opening up their homes to look after other peoples dogs when they are out at work. The following points prove just how important dog daycare is.    1. Your dog will get to interact with lots of other dogs which is vitally important for pack integration. This is even more important if your dog is a puppy as many of the behavioural problems that we see in dogs occur because they are poorly socialised when they are young.    2. Dogs that integrate just with their owners and no other dogs or people can suffer from anxiety and fear biting. This can also cause separation anxiety and cause the dog to be a nervous wreck when it does eventually for some reason have to be apart from its owners. This is very unfair on the dog as it will be suffering all sorts of negative emotions which are unnatural and wouldn’t be apparent in the wild.    3. Dogs love it! They get to go to dog daycare on a regular basis so they make friends with the other dogs and look forward to going every time. What would you prefer staying at home on your own all day or meeting up with your friends and having fun, it’s the same for your dog!    4. Protect your home – if your dog is at dog daycare having a great time, he won’t be at your home, bored, causing him to chew and destroy the furniture and toileting around your home.    5. At dog daycare your dog will get walked at least once a day where they will play with the other dogs and have a great time.    6. On the dog walks at dog daycare your dog will get basic dog training to work on his recall, use of commands and walking on the lead. If you are in the process of puppy training this will help to reinforce that training on a regular basis. Dog daycare is obviously more expensive than leaving your dog on its own but is worth every penny as you will return home from work to a happy and content dog and not feel stressed and worried that it’s on its own. Also it will teach your dog to be well socialised and fully integrated with other dogs and stop separation anxiety and aggression to other dogs. 4 Paws in the park is a premium dog walking and pet service, based in a family home in East Sheen, London, providing a modern and preferred alternative to kennels.4 Paws in the Park offers a range of pet services to make your life happy and stress free. They include: Dog walking, dog boarding, dog daycare, pet feeding and pet taxi services.4 Paws in the park is owned by Brodie Ellis. Originally from the Cotswolds, i naturally grew up surrounded by animals of all shapes and sizes. I am and have always been a huge animal lover and nothing makes me happier than a content and happy animal. I have two dogs of my own and so i understand that it can be very stressful leaving your pet for long periods of time and finding someone you trust to look after them. For more information please visit: Article Source:

Continue reading →

Dog Allergy – Food Allergy In Dogs

There are many different types of dog allergies, food allergies being the third most common and affecting about 10% of all domestic dogs. Contrary to popular belief, it is not the colorings and additives in dog foods that can lead to dog food allergies, but instead it appears to be foods that are not natural to dogs such as cheese and tuna, and also an excess of proteins in protein-rich foods. However, that does not explain all allergies in dogs relating to foods, since many dogs can take a severe allergic reaction to foods specifically designed for dogs. It would appear that just as humans have allergies to nuts, fish, eggs and so on, a dog allergy, food-related or not, can be equally random in the way individual dogs react to it. So how can you diagnose such allergies? Dogs react to food allergies in many different ways although the general reaction is scratching. Most dog allergies irritate the dog’s skin, and so, just as we do with an itch, the dog will scratch. However, should a dog allergy become severe, it can go beyond scratching and bite or even gnaw at the offending area of its skin. The physical result can be a loss of hair and inflammation of the skin as the immune system does its work to increase blood flow to affected area, and eventually react to any bacterial infection that can arise from the dog breaking the skin. However, with regard to a dog allergy, food will naturally pass into the digestive system, and a true allergy will tend to cause loose stools or even diarrhea, and also vomiting in many cases. Even in the absence of these rather extreme effects, the dog’s bowel movements will be more frequent, and there might be sneezing, coughing, nasal discharge, loss of appetite and anal irritation. Your dog might sit down and pull its nether region along the carpet to ease the anal itching, and many dogs will also have significant ear infections when they suffer a food allergy. It is important that you consider all of these symptoms together, rather than in isolation, because each in itself could indicate another health condition or even a different allergy However when taken together, it should be possible for you to diagnose a dog allergy – food related rather than for any other reason. Flea allergies and other topical allergies display some of these symptoms, but not them all, and the same is true of atopic allergies such as dog hay fever. Only a canine food allergy will display them all, and then you can consider how to help your dog with his or her diet. Your dog eats what you provide, and your ‘best friend’ relies upon you to provide food that it enjoys eating and that is safe to eat. Once you have diagnosed a dog food allergy, you can certainly do something to help. First, dogs rarely develop an allergic reaction to food overnight, so this situation will likely be connected with some change in his diet, or something your dog has been eating without your knowledge. In order to establish the root cause of the problem, you might consider any changes you have made to your dog’s diet lately – have you found a less expensive deal on dog biscuits, or maybe made a change to its canned food? Whatever the cause, it would help you and your dog significantly if you could identify the change to its diet since the problem was first noted. A dog allergy food-related problem often occurs due to animal proteins, such as turkey, chicken, pork or cheese and other dairy products that have been fed to it as a ‘treat’ – often at some family get-together event when you have guests who might ‘feed the dog’ with tidbits at the table. You are best to keep any pets out of the house or in a different room at such times, because this kind of protein-rich food that your pet is not used to is a common cause of food allergies. So what is the cure if you believe your best friend to have a dog allergy, food related rather than caused by some other allergen? You can try to determine which food is the cause of the problem, or get the dog back to the food he has been eating until you noticed the problem. Have you changed his diet lately? Has she been disappearing for a while and then seemed not to be as hungry as normal later? Follow her and see what she is getting up to. You could feed your dog the normal food that he has been reacting to, and then remove one ingredient at a time until you identify what is causing the problem. Any dog allergy – food related or not – can be serious because your dog will scratch and bite and gnaw at its skin until it is severely infected. So find the cause and deal with it. More details about dog allergies and how to diagnose and treat a Dog Allergy Food Related problem can be found on Dog Allergy Treatments which explains many different types of dog allergy. Article Source:

Continue reading →