Rental property Capital Expenses - Percentage of area change

[Doubledown]

Last year We were renting out 50% of our house. This year we have changed to renting out 25% of the house. Will the capital expenses I carried forward from last year still use the 50% square footage rate or will it all (last and current year expenses) be calculated on the new square footage rate...25%?

[TurboTaxKim]

If your carry forward your information in TurboTax, the Undepreciated Capital Cost (UCC) amounts are going to reflect the 50%.

Assuming you are claiming Class 1 CCA , there is no need to adjust the UCC amounts that have carried forward, instead you will need to claim a Deemed Disposition of 50% of the Rental Portion of the house. 

• Assuming the house has not appreciated in value tremendously, a fairly accurate way to do this would be claiming 50% of the starting cost you entered in Class 1 as the Deemed Disposition. 
• If the house has appreciated in value since the time you started claiming Class 1 CCA, you should determine the Fair Market Value (FMV) of the entire house and claim 25% as the Deemed disposition. 

Here's some more information on disposing of property you might find helpful: TurboTax Tips