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Level 2
posted Oct 30, 2019 7:52:44 PM

How do I claim a current rental property that might become a primary residence - with regard to expense write offs and CCA

We bought the property a year ago with the intention of eventually selling our primary residence and moving into the new property.  For the last year we've rented it out.  Is there a way to avoid paying Capital gains on the rental if we eventual sell it as it will have been a rental for 1+ years and then our primary residence.  Can I claim the usual expenses against the income this year (taxes, interest, insurance) but just not claim CCA to avoid capital gains later or is that just not possible.

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New Member
Oct 30, 2019 7:52:45 PM

There are several things to be considered here. 

  1. Did you own another house you were living in while renting this one out? If not, you can deem this as your principle residence for up to 2 years (not sure on the number of years). If you did own another house you were living in, you can not deem this as principle residence. ie only one home can be principle. 
  2. CCA - this is only somewhat tied to capital gains. If you use CCA (Depreciation) and it doesn't go down in value, you would have a recapture of any CCA taken on the rental building. ie if over ten years you claimed $10,000 in CCA but the building went up in value, you have a recapture of $10,000 as well as the Capital gain in the year you sell. We generally recommend not taking CCA on most rentals since they rarely depreciate. 
  3. Capital gains - unless you can deem this as a personal residence, you will pay capital gain from the time you rent it till you move in. You would report the gain in the year you move in. 
  4. You can claim all the usual expenses until you move in.
  5. Keep all capital expenses such as windows or doors, furnace etc to use for adjusted cost base when you move in. By increasing the ACB of the building, you can reduce some capital gains. 

Check out the Rental guide here: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036/rental-income...