CCA on rental

[s2k_boi]

Hi,

Has anyone done CCA on a rental property? If so, is it worth the extra work to figure it out and anyone know how the consequences work when you sell it in the future?

Thanks!

[Xtrema]

This quote is hidden because you are ignoring this member. Show Quote

Hi,

Has anyone done CCA on a rental property? If so, is it worth the extra work to figure it out and anyone know how the consequences work when you sell it in the future?

Thanks!

I was advised that only do CCA if you know 100% you will sell the property at a loss or very little gain in the future.

Or you timed selling and the cap gain on a year where you have very little to no income because of CCA recapture.



http://www.thebluntbeancounter.com/2...allowance.html

The reason some people do not claim CCA is a concept known as recapture. When you sell a building or rental property for proceeds equal to or greater than the original cost of the building, any CCA claimed since day one is “recaptured” and taxed as regular income.

[suntan]

Not a problem in Calgary anymore!

[triplep]

This quote is hidden because you are ignoring this member. Show Quote

I was advised that only do CCA if you know 100% you will sell the property at a loss or very little gain in the future.

Or you timed selling and the cap gain on a year where you have very little to no income because of CCA recapture.



http://www.thebluntbeancounter.com/2...allowance.html

It depends who you ask. If you take into account time value of money, claiming the deduction now is more valuable then having to potentially pay it back in the future.

Also, keep in mind that if you already have a loss before claiming CCA then you won't be able to claim it anyways. You cannot create a bigger loss with CCA for rental properties. Also, if you have say $1,000 of income for tax purposes, the maximum amount of CCA you will be able to claim is $1,000.

It isn't very hard work to claim it and calculate it, as long as you are consistent with the allocation between the building and land (since you can't claim CCA on land).

[sabad66]

This quote is hidden because you are ignoring this member. Show Quote

It depends who you ask. If you take into account time value of money, claiming the deduction now is more valuable then having to potentially pay it back in the future.

Also, keep in mind that if you already have a loss before claiming CCA then you won't be able to claim it anyways. You cannot create a bigger loss with CCA for rental properties. Also, if you have say $1,000 of income for tax purposes, the maximum amount of CCA you will be able to claim is $1,000.

It isn't very hard work to claim it and calculate it, as long as you are consistent with the allocation between the building and land (since you can't claim CCA on land).

How do you decide what % of value is building vs. land?

[triplep]

This quote is hidden because you are ignoring this member. Show Quote

How do you decide what % of value is building vs. land?

It has to be reasonable, how you determine that it is up to you.

If you are buying a new house and they still sell the lot separately from the house, that would be fairly easy to determine land value versus building value. Not sure if property tax assessments show a breakdown between land and building (they might). Another thing you could potentially look at is what did insurance determine as the replacement cost of the house? If you bought for $500,000 the replacement cost won't be $500,000 but something less. Or if you were getting an appraisal done for mortgage purposes, you could review that and see if they have something in there, or even ask them to provide you a breakdown.

As long as you have some support for your allocation CRA is more inclined to agree with you (as the onus of proof) will be up to you.