Comments on: Rental Property Income Taxes and Deductions

By: DAvid

DAvid — Sun, 07 Mar 2010 02:30:24 +0000

Marie,
Here’s my take, though I’m not an expert:

“I replaced a rotten deck with new wood, “
If you did more than just replace a few rotten boards, and have increased the value of the property then I would consider it a capital improvement. Had you replaced a large rotting deck with a set of steps to access the door, then it would be repairs.

“and I replaced a main floor bath because of rot,”
Again, if you did more than necessary to make it safe, then you may have gone beyond “repairs”

“I replaced a dead furnace and fridge,”
If both are beyond repair, then “repairs”. Replacing a leaking hot water tank would fit this category as well. If on the other hand your reason for replacing the furnace (or fridge) rather than repairing it was to recoup costs on the energy savings of new, efficient equipment then you are back into capital expense.

“and I gutted the basement apartment because it was mouldy.”
Capital expense. If you have a writ of some sort against the house you may be into a repair, however, usually mould has to be pretty severe to ‘gut’ the space rather than effect repairs in simpler fashion.

It sounds like you bought a “fixer-upper”, which you have decided to rent. If you looked at it in a slightly different fashion, it might be clearer for you. Say you bought the same house (a depreciated asset) to flip in the real estate market. Which of the tasks you describe above would be done to improve the real value of the house, versus which would maintain the status quo — as a living space? Once you go beyond addressing safety issues, you begin to add value. Clearly many of the tasks you describe would add value.

The CRA may allow some of these depending on the actual situation — speak to an accountant for real advice.

DAvid

By: Marie

Marie — Sat, 06 Mar 2010 23:57:13 +0000

On the Canadian guide it says repairs to make a property suitable to rent are capital expenses, but on the next page it says repairs are current expenses if they were necessary. What does necessary mean? I replaced a rotten deck with new wood, and I replaced a main floor bath because of rot, I replaced a dead furnace and fridge, and I gutted the basement apartment because it was mouldy. I see all these as necessary, but are they??

By: Financial Cents

Financial Cents — Sat, 06 Mar 2010 13:38:11 +0000

@ Thelma,
Yes, as far as I know, you need to claim that as income.

By: FrugalTrader

FrugalTrader — Sat, 06 Mar 2010 00:52:45 +0000

Thelma, you may want to double check with your accountant, but I believe you can claim the loss on your rental against your regular income (if it’s under your name).

By: Thelma

Thelma — Fri, 05 Mar 2010 22:03:24 +0000

I have a question: I am renting out my principal residence (temporary) in Maple Ridge, BC for about a year, at which time I am moving back. My mortgage payments are$1860 per month, and I am renting the unit (townhouse) for $1700 per month. Do I still report this as an income? I also pay the taxes, levies and insurance on this townhouse. Thank you

By: Bhupinder Datta

Bhupinder Datta — Wed, 03 Mar 2010 15:34:24 +0000

I have a condo in NJ that I lived in. I then moved to MD in July of 2009 and I am still there. I put the condo up for rent but never found any body. I advertised etc.
Can I take any deductions for 2009 and in future?

By: bal grewal

bal grewal — Wed, 03 Mar 2010 02:07:01 +0000

Hi from a new subsciber my question is four years ago my wife and i purchaced a house for our son who was eighteen at the time and just graduated.the plan was to put the house in our name along with the house hold bills heat hydro and so on we are now looking to put the house in our sons name how would i do this minizing all gains and keep the tax man happy

By: Newfiepet

Newfiepet — Sat, 20 Feb 2010 14:20:01 +0000

I’m in the process of doing my 2009 taxes using Quick Tax software. After selling property in 2009 I am left with a Recapture of CCA of $130,000 however because the buildings depreciated in value due to market conditions in our rural area I have a Capital Gains Loss (Line 199) of $26,000 that apparently cannot be used against my taxes this year. Is there anything further I can do to reduce income tax, other than regular expenses.

By: Financial Cents

Financial Cents — Sun, 07 Feb 2010 13:49:50 +0000

pravspress0,

Yes, you can claim condo common elements fees/condo fees. We have for the past two years. Those costs must be filed on your T776 form. If you don’t know what I’m talking about, I would suggest you consult a tax accountant.

Good luck!

By: Pete

Pete — Sun, 07 Feb 2010 05:11:53 +0000

Hi newfiegirl ,

You should keep the percentage constant between the house and land values.
Unless you let the house rot, then its value could go down , while the land stayed the same or went up. To pay the least tax , hopefully your land went up and the house rotted, but you had better be prepared to back up your statements. Keeping the percentage constant is the normal thing.

By: newfiegirl

newfiegirl — Sat, 06 Feb 2010 16:19:19 +0000

Hi Frugal Trader,
In 2009 we sold two rental properties. There was no capital gains because they were sold for less than their initial purchase value. We did however clain CCA for twenty years and have depreciation recapture. Can you explain how this works – formula? For tax benefits – is it best to have the value of the land included in the sale higher, lower, or same as the initial cost?

By: FrugalTrader

FrugalTrader — Sun, 31 Jan 2010 16:08:20 +0000

paul, my understanding is that forming a corporation provides little benefit for a small time real estate investor. There may be some extra liability protection (house insurance covers a lot of it), but rental income is taxed at the highest corporate rate. I would recommend that you speak with an accountant before proceeding.

By: paul

paul — Sat, 30 Jan 2010 22:06:10 +0000

we live in alberta,i make substantially more than my wife and we “income share” already.We’re going to purchase a rental property in BC that’ll make aprox 100 a month.Should we start a numbered company,in whose name,if in mine, should i hire her as an employee?If so,do i need to pay workmans comp?,what can we claim for expenses(ie office space in our home? etc)We’ll have plenty of expenses to claim as it’s a long way from us,so plenty of travel initially etc.would it be better to start a company in Alberta or BC,taxes are better here,but the property is there?Sorry for the repeat questions.It’s all new to us and quite overwhelming trying to decide the best way to eliviate taxes.

By: Jared

Jared — Mon, 25 Jan 2010 03:48:14 +0000

Does anyone have an excel spreadsheet or have a link to one that will help analyze Investment Properties for Canada? I have looked a few online but the ones I have found are all based on the US .

By: FrugalTrader

FrugalTrader — Sat, 16 Jan 2010 21:48:37 +0000

Keewantinrental, with regards to question 1, GST is calculated separately from other deductions. However, I’m not sure how GST works with rental properties as GST isn’t charged on rental income. About the home office, if you run a substantial rental business, then there claiming some office deductions is a possibility. However, you should consult with an accountant to get the facts.

By: Keewatinrental

Keewatinrental — Sat, 16 Jan 2010 21:03:31 +0000

Question 1:
I am confused regarding the GST rebate and gst paid while renovating/ repairing rental property as well as GST pd on vehicle expenses such as fuel and repairs.

When I am deducting my rental/vehicle expenses do I claim the whole amount (including taxes pst/gst) or do I have to deduct the gst and then separately claim the GST rebate?

Question 2:
We have an office within our home where we store past income tax returns, computer where I pay rental bills etc. I am able to expense any costs for my home office under our rental properties?

We have a duplex with two suites in another province (2 hrs away), one rental home in the same town where we live and another vacation/rental property (newly acquired and plan to rent out this summer).

THX

By: FrugalTrader

FrugalTrader — Fri, 15 Jan 2010 00:48:51 +0000

Tammy, afaik, as long as you have the “intention” to rent it (ie. for rent ads), then you can claim the loss. I believe though that CRA expects you to rent it out after a period of time.

By: Tammy

Tammy — Thu, 14 Jan 2010 20:03:54 +0000

In Canada where can I claim a loss for a month an apartment sat empty that I own?

By: FrugalTrader

FrugalTrader — Thu, 17 Dec 2009 19:35:01 +0000

Seems logical to me that condos fees would be considered as an expense. Best to break down what exactly what the condo fees consist of and consult a tax pro to see if the deduction holds.

By: pravspress0

pravspress0 — Thu, 17 Dec 2009 19:04:53 +0000

Are condo maintenace fee’s considered a deduction against rental income if the dwelling is used as a rental property?

Our maintenance fee’s are $805.mth. Ontario.

cheers