I have yet to find a great resource to determine whether I should claim CCA on my rental property or not. What I am reading here is that if you have a rental apartment in your primary residence then you shouldn't. But what if you have a rental apartment in your primary residence and also have another rental property profiting approx. $10,000/ per year.
What are the factors to decide whether or not to claim CCA on a rental property? Here is what I think it depends on:
Can someone please comment or add to the list of deciding factors? Some scenarios of specific tax situations would be helpful as well! Thanks
Oh I love this question. This is one that we get asked often.
You are on the right track with your considerations. One thing I would add is whether or not the property is actually depreciating. Here is an example.
Joe has a condo that he paid $200,000. He really needed his money for the last few years so he took the depreciation and continued to do so. Joe sells this condo in 2017 for $300,000. The condo has not gone down in value. Over the years, Joe took $10,000 worth of depreciation. So for 2017 Joe has a capital gain of $100,000 plus a recapture of $10,000 which is what he had depreciated his condo for. Joe is kicking himself for taking depreciation as his income is too high and he will be taxed in the higher tax bracket.
If joe sells the property for less than the original, he would have a capital loss and no recapture. (Unless he sold for more than the undepreciated capital cost.) If he sold for less than the UCC, he will have a terminal loss as well as a capital loss.