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 Be clear on what you are doing when you make stuctural changes to your principal residence to create a rental suite.
Realize that, if you deduct Capital cost allowance (CCA) on the property, you are changing the use of part of your principal residence into capital property. This means that when you sell this property you will pay tax on any capital gains made on that part of the property which is used as a rental suite.
Although part of your principal residence is rented, and you declare the rental income every year, you can avoid converting part of your principal residence into capital property, as long as you meet all the following conditions.
As per Canada Revenue Agency:
You are not considered to have changed it's use if you meet all of the following: Rental use is relatively small in relation to the use as a principal res idence. You do not make any structural changes to make it rental property. You do not deduct any CCA on the part you use for rental.
If you meet all the above all of your property can continue to be your principal residence for tax purposes. Renting a suite in your principal residence can be a
good idea but be careful not to change part of your principal residence into Capital Property unless you clearly want to do that.
Pat
Definition:
Capital Property
Generally, depreciable property and property in
relation to which a gain or loss on disposition of the property would
be a capital gain or a capital loss. Capital property may be any kind
of property but does not include inventory of a business.
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help
Written by 'Guest' on 2008-04-29 15:02:19
I have a house which about 30% of it (basement floor)which I am renting.at the same time I have spent more than 15k to repair it due to water dammage and other repairs needed. Now at tax time if I put 15 K against 10k that I have make that makes a big return on my tax . I am worried how this is going to affect things when I sell my house as this is not a small portion of my house. Although I have a 6000 sq. ft. house and I have lot of room to myself and the basement is a unit with seperat walk in door...
Please help me.
thanks
Natalie | Two Questions about renting
Written by 'Guest' on 2009-02-20 19:02:08
Hello,
I have two questions about claiming rental income/expenses.
1) In reference to the three conditions that keep a property from become a capital property, what percentage of a residence is generally considered "reasonably small" in proportion to the entire residence?
2) Also, if I am renting part of my principal residence, am I able to deduct a percentage of my mortgage interest, or is that only for properties that were purchased solely for rental purposes?
Thanks!
Casey |
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Real Estate 