Tax Season is Upon Us Again!

Wednesday Apr 04th, 2018

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Tax season is upon us again! While it's a great time to celebrate the additional income your rental properties have generated for you this past year, it's also time to calculate the amount of taxes owed to CRA. Did you know that your rental properties may be eligible for capital cost allocations (CCA) to help reduce your tax liabilities:

  • As your rental properties (including the building, furniture and equipment) wear out over time you can write off the capital costs incurred in their acquisition. This includes costs such as purchase price and legal fees incurred
  • Most rental properties acquired after 1987 are eligible for a 4% annual depreciation based on the declining balance method on the building value of your property
  • You get to choose when and the amount of CCA (up to the maximum allowable for the year) to claim
  • Upon sale of the property, all prior CCA claims are recaptured and treated as taxable income (100% taxable) in addition to capital gains (taxed at 50% of the gains)
  • While you can not create or increase a rental loss by claiming CCA, it is a great consideration for reducing your income tax liabilities
  • Even if you choose not to claim CCA for your properties, there are other eligible deductions to keep in mind including homeowner’s insurance, property taxes, maintenance fees, advertising, mortgage interest, utility costs and property management fees

There are many intricate details pertaining to CCA, please visit your tax professional and the CRA's website for further advice:

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/capital-cost-allowance-rental-property.html

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