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Thread: Upgrades on a New Build Rental. Tax deductible?

  1. #1
    Join Date
    Apr 2009
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    Default Upgrades on a New Build Rental. Tax deductible?

    After filing my taxes, I realized I may have a potentially unclaimed deduction on the upgrades I purchased. The situation is:

    - New build home. Rented out starting from my possession date so I've never lived there.
    - $1k in upgrades went into the house. Paid in cash outside of the mortgage.

    Am I able to claim that $1k in upgrades as a rental expense? If so, is it a simple entry into one of the Rental Income Expense Lines or does it fall under that Capital Cost Allowance section? Also, assuming I used my Line of Credit to pay for those upgrades, is the interest on the money borrowed for those upgrades deductible as well?

    Any accountants, or people in the know, able to chime in on this? I'll be checking with my accountant on the weekend but I'm curious to know where I stand before hand.

  2. #2
    Join Date
    Jan 2004
    Calgary, Alberta
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    Since I don't know what the $1K is for, you should determine for yourself if you want to risk it.

    But I'm guessing it's capital expenses and since the house is new, you probably can't deduct anything.

  3. #3
    Join Date
    Feb 2003
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    '11 S4 Blue German Monster
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    Interest used to earn investment income is deductible (aside from RRSP), so yes.

    The above link is crystal clear on expense vs. capital. With CRA, take a position that is defensible and ensure it passes the smell test. There is no written rule, but generally items under $500 are expensible and worthless to track in a CRA class.

    In your situation, I am 99.9% positive it is a capital expense as you classified it an upgrade and therefore should be added to ACB of your property.
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