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Financing, Mortgages and Insurance What options are best for you and your situation?


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Old 2017-03-06, 10:02 PM
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Default Townhouse rental and CCA for tax purpose

Hello, we have a newer (built in 2014) townhouse for rent and I am wondering if I should claim CCA (Capital Cost Allowance) for income tax purpose?

If so, could you please let me know what Class I should use (I am guess Class 1) and what information I need to provide because there are a bunch of fields I am not familiar with (Opening balance of the undepreciated cost, To whom the CCA should be allocated etc).

It's a little bit overwhelming and I am trying to read/do research as much as I can.

What are the pros and cons of claiming CCA for a new(er) townhouse rental? We intend to keep this for the long haul.

Thanks.
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Old 2017-03-07, 07:51 AM
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CCA strategies are outside of my knowledge box.

One thing to be aware of is future capital gains. If this was purchased as a rental, the start value is known. If you lived in it first, the value when it was converted to a rental needs to be known. I think some sort of appraisal is needed. Otherwise you could end up paying for equity gains that happened while it was your personal residence.
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Old 2017-03-07, 08:16 AM
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What does your accountant suggest?
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Old 2017-03-07, 10:14 AM
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Quote:
Originally Posted by GregS View Post
What does your accountant suggest?
I don't have 1, else i would not post here, Greg

I look after our own finance, including tax-filing and I would like to think this is not rocket science. Just take time to do research and find the right answer.
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Old 2017-03-07, 11:33 AM
oakvillehomeowner oakvillehomeowner is offline
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this is an area where you should have at least a quick discussion with an accountant.

claiming CCA on an asset that is likely to rise in value will expose you to recapture of all your previously claimed CCA in addition to the capital gains on the property.

most people are better off not claiming CCA, and making sure to keep track of any cost that could be characterized as an improvement to increase their ACB of the property.

the opening balance depends on a lot of things (like when the change of use from primary residence to investment property), and you will need to retain sufficient backup to withstand an audit.

it's not rocket science, but you've already admitted that you're overwhelmed. your questions won't all have simple answers that can be researched on the internet.

you can get decent and cost effective advice from a local mid-sized firm (think BDO or smaller), and the cost of that advice is tax deductible.

Last edited by oakvillehomeowner; 2017-03-07 at 11:35 AM.
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Old 2017-03-07, 05:07 PM
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That's as close to an accountants advice as you are going to get on the internet
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Old 2017-03-07, 08:32 PM
Mark & Lynda Mark & Lynda is offline
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Keep it simple. Don't depreciate your property.

http://business.financialpost.com/pe...tate-confusion
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Old 2017-03-08, 12:40 PM
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As others have stated, talking to an accountant may be a good idea. Getting advise from people here may end up costing you big bucks later.

That said, my understanding is that you can only claim CCA on the building portion of your townhouse, not on the land portion. So, unless you have an appraisal which indicates how much the building alone was worth when you purchased/converted to a rental, then your first step, after talking to an accountant, would be to determine that. After that most current tax software can calculate things for you and answer most questions.

As a note, I have found that almost all tax software I have used will automatically claim CCA in any year when you have a net profit on your property (to reduce the profits to 0). If you have a loss you cannot claim CCA.
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Old 2017-03-08, 02:15 PM
oakvillehomeowner oakvillehomeowner is offline
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Quote:
Originally Posted by gerapau View Post
If you have a loss you cannot claim CCA.
You can claim CCA, but you don't want to. Losses can have limited carryforward periods, but UCC can be carried forward indefinitely.
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Old 2017-03-09, 07:23 AM
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Quote:
Originally Posted by oakvillehomeowner View Post
You can claim CCA, but you don't want to. Losses can have limited carryforward periods, but UCC can be carried forward indefinitely.
My understanding, and I am not an accountant, is that CCA can only be used to reduce your rental income to 0. It can not be used to create or increase a loss. Is this not correct? Or are you saying that in theory you could carry forward your loss (meaning you wouldn't actually have a loss in that year) and then use the CCA?
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