Death and taxes. Let’s start with taxes.
Details on tax deductions, capital gains, and depreciation
In a perfect world, we wouldn’t pay any tax. Unfortunately for real estate investors, Canada Revenue Agency doesn’t exempt us from paying our share either. Having said that, there are however some very important rules and benefits to taxation when it comes to real estate investing.
Tax deductions – CRA allows any expenses incurred during ownership of an investment property to be deducted from the overall gross rental income of the property. Certain examples include property tax, utilities, maintenance and repairs (capital expenses are not deductible and are rather added to the overall cost base), insurance, legal and accounting fees, marketing and advertising and much more.
Depreciation – CRA assumes that all assets, including tangible real estate, depreciates over time due to normal wear and tear. Tax rules allow for the depreciated amount to be deducted from overall gross rental income of the subject property (caution though must be made in terms of recaptured capital gains at time of disposition).
The bottom line is that the government wants you to own real estate. This is evident from the numerous incentive programs and tax benefits available.
If you ever have any questions about real estate taxation, any at all, please don’t be shy. Give me a call or send me a text or email. I am always willing to chat real estate over a cold beer or strong coffee.