![]() ![]() Here are the questions the CRA uses to determine whether an expense is a capital expense or current expense: The Canada Revenue Agency (CRA) defines capital expenses as “renovations and expenses that extend the useful life of your property or improve it beyond its original condition.” Placing vinyl siding on the exterior walls of your wooden property, for instance, is a capital expense because it improves upon the original condition or value of the property. Current expenses include repairs and maintenance.Ĭapital expenditures, on the other hand, offer a lasting advantage or benefit to the market value of the original condition or value of the property. ![]() An example of capital costs provided by the Canada Revenue Agency is the cost you incur to paint the exterior of your wooden property. Generally speaking, a current expense reoccurs after a short period. The other is referred to as capital expenditures. As you will realize shortly, some expenses are only acceptable as a deduction in the year you incur them, while others are deductible in future years. The CRA specifies not only the expenses that can be deducted from your rental income but also when, specifically the tax year, in which they can be deducted. But for now, it would be best if you first understand the difference between current expense and capital costs, the two major types of expenses on rental property recognized by the Canadian Revenue Agency (CRA).īasic Types of Expenses for Deductions on Rental Property in Canada Later on in the article, we’ll be taking a closer look at income and expenses and each of these rental property tax deductions in Canada. To answer you briefly, yes, your rental income is taxable and, thankfully, you are able to deduct many expenses from the income on your rental properties for tax purposes. You might be wondering, “Do I have to report all that income I earn from my rental properties on my tax return, or can I make deductions from it?” However, you can also deduct expenses from your income for tax purposes.ĭo you know what rental property expenses you are able to deduct in Canada, and what to do when tax season comes around? Do you know the tax implications of every capital expense, business and personal expenses, capital expenditures, house insurance, mortgage insurance, mortgage interest, certain motor vehicle expenses, payments to a property manager, and other deductible expenses on rental properties? At the end of the month, you usually expect some rental income, and come tax time, the Canada Revenue Agency expects you to declare all of it on your tax return. If you’re reading this, you probably own one rental property or several rental properties in Canada or rent out a few rooms in your principal residence. ![]()
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