Owning a separate rental property or renting out a space in your home can be a great way to make some additional income; however, it’s important you understand the tax implications that surround this type of endeavor. Read on for Liu & Associate’s guide to rental properties, taxes and more!
Claiming Rental Income
Regardless of the type of property you are renting (a room, your basement, a separate property), you must report all rental income to the CRA on a yearly basis. You’ll need to fill out a T776 – Statement of Real Estate Rentals form, which will allow you to claim the rent received from any tenants, as well as give you a space to claim expenses.
If you’re renting out your principal residence (aka, the place you live in), you can claim a certain percentage of the household expenses. The amount you can claim is based off the size of the rental suite. If your basement suite takes up 25% of your home, you can claim 25% of your household expenses. Claimable expenses are things like heat, water, power, home insurance, etc.
Claiming Capital Cost Allowance (CCA)
This is where things can get a bit tricky, because there are a couple routes you can take. When performing long-term renovations on a rental property, such as installing a new roof, you can claim something called capital cost allowance (CCA). Claiming CCA gives you a tax break in the short term, but means that you will have to pay capital gains when you decide to sell your home.
If you decide not to claim CCA, you won’t receive any depreciation on your renovation, but you also do not have to pay capital gains when you sell your house. Whether or not you decide to claim any CCA will depend on your own unique situation. It’s best to chat with an accountant to see what’s best for you!
If you have a rental property and have questions about your taxes, give the team at Liu & Associates a call! Our expert accountants will ensure you’re getting the maximum return, while making informed recommendations that will benefit you in the long run.