My_question_is: Canadian-specific
Subject: CCA on rental property in Canada
Expert: taxman at centa.com
Date: Sunday May 07, 2006
Time: 02:29 PM -0700
QUESTION:
I am a US resident Canadian and have lived in the US since 2000. Last year I
got homesick and bought a condo in Ottawa which has been rented out since
Aug 2005. We realize now we would prefer to retire in Victoria and I will
sell the condo when the tenants lease runs out in July 2007. Am I better off
not to claim the CCA on the house on my 2005 CDN income tax (rental income
only) - I am afraid of having to pay more tax on capital gains for 2007 if I
claim the CCA now (i do not need a CCA for 2005 to bring net income to
zero - already in a loss without it)
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david ingram replies:
You cannot claim CCA unless you have a rental profit. And you can not carry
a loss forward - - You should consider capitalizing the interest to increase
the ACB.
This former Q & A might help
=======================
Hi, I have a rental property .. if you have more deductions than profit does
that role over to the next year ? .. thank you .. Cxxxxxxx
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david ingram replies:
In Canada, you would fill in form T776. If the bottom figure is a loss
(excluding Capital cost Allowance (CCA which most people call depreciation
in Canada) ), you would put the loss on line 126 of your T1 general and get
a deduction against other income.
In the event that you are an American resident with a Canadian rental which
is losing money, any loss can NOT be carried forward AND can NOT (I repeat
NOT) be carried forward. The secret is to elect to capitalize the interest
under Section 21 and increase the ACB (Adjusted Coast Base) of the property.
In the US, you would calculate the loss on schedule E and claim depreciation
on schedule 4562. Depreciation MUST be calculated with the exception of a
limited number of persons holding on to their property to sell it an even
then, only the California courts (out of six possible national courts
dealing with the subject) has recognized or suggested that a person renting
while waiting to sell their residential house can file their return without
claiming what amounts to mandatory depreciation.
The good news is that if you are a non-resident of the USA owning US rental
property, you get to carry the loss over to other years unlike Canada where
I remind you that a non-resident can NOT carry a loss over to other years.
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