Rehab Taxes in Canada?
Hi,
I'm fairly new into the real estate business where i'm currently in the process of reading/researching the opportunities available in real estate.
What has caught my interest is rehabbing properties. My question is, how does the tax system work for rehabbing properties in Canada? What kind of expenses can I claim?
This is what I undestand, somebody correct me if i'm wrong:
Say I make: 50K/year on my day to day job. Then I make 40K capital gain on a property not including expenses(say 10K renovations). Does that mean that I made 80K total income that year and taxed at a higher tax bracket? Or can I claim the renovations at all?
Any help would be much appreciated,
Thanks,
Joe
You Can Claim all expenses of the project including interest ,legal fees and all other costs. But at Tax time you will be subject to Capital Gains tax, example
you sell the property for $50k more than you paid for it, $10k expenses.
your profit is $40k, under capital gains tax half is tax free the other $20k you will pay at your regular tax rate. However you are limited to $250k of capital gains deduction in your lifetime. My view is use the gains deduction while you can ,back in the 1980's it was $400k in a lifetime they reduced it and who knows in the future what the Gov might do.
From Northern Alberta
Hi there,
Ccic from Northern Alberta is absolutely right. If you don't live in the house you're rehabbing, you can claim all the materials, labor, if hired, utilities, insurance, and mortgage interest as deductions.
I live in Southern Ontario but invest mostly in the US, and my advice is be very careful drawing any parallels, not only regarding taxes but in general.
Best of luck,
Marzena