Hi, I bought a rental in 2017, did renovations; found tenants for Feb 2018. They gave first and last month rent in Dec 2017. Do we claim income for 2017?

[ckchao]

If we claim income for 2017, what can we claim to reduce this income? soft cost such as mortgage interest and property tax?
If we can only claim this income for 2018, does that mean all "current expenses" in 2017 are wasted (can't be claimed)? Or can we make them capital costs? Add renovation cost, utilities cost during renovation period, mortgage interest, house insurance, property tax to the cost of the building?
Thanks in advance.

[bern36]

clarification question:  Would the utilities costs be considered a soft cost or an expense (and as such a loss even though no income for the 2017 year).  Would all the soft costs also be added to the ACB as a class 1 property?

[TurboTax-Terry]

If the property was not available to rent, under construction or renovation then expenses such as utilities, interest and property tax may be considered as soft costs and added to the ACB of the property.

[TurboTax-Terry]

If you were preparing the property for rent you would claim the expenses for the year they were paid as well as operating expenses. If you needed to make considerable renovations to the property that improved it's commercial viability or it would not be inhabitable without your renovations then you would add the cost to the ACB of the property usually Class 1.

If the property could not be inhabited during the renovation process then the operating expense would classify as soft costs as you describe them and also be added to the ACB. Keep in mind if this a house and has land as a part of the value then the costs like taxes and interest must be apportioned between the building lass and Land (Class 90) which cannot be depreciated (claim CCA).

You have some flexibility in determining whether an expense meets the definition of soft costs.

You also must determine if you are using the Cash or Accrual method of accounting. It is preferred that you use Accrual to report income and expenses. It that is the case then the rent you have collected will not be claimed until 2018 (first month only as the last month has not been determined). If you are not claiming soft costs then you could report a loss for 2017 for expenses that relate to calendar year. Insurance may cover more then one calendar year period and needs to be prorated as an example.