What is Capital Cost Allowance (CCA)?
An amount expressed as a % allowed under the Income Tax Act to be expensed against the cost of capital assets acquired by a business. CCA represents the annual depreciation expense allowed by the Canadian Income Tax Act. Make sure to deduct depreciation, it is the tax-shelter benefit of real estate ownership.
We have compiled a list of the possible deductions for investors. Although this list is fairly comprehensive, a professional opinion is still important. Please ensure that you contact your accountant for specific Income Tax laws. Through careful planning at the start of each year you can ensure hundreds if not thousands in income tax savings at the end of the year.
These are taken directly from: The Statement of Real Estate Rentals Tax Form T4036.
T4036 can be found at: www.ccra-adrc.gc.ca/E/pub/tg/t4036/t4036-08-e.html
Line 8521- Advertising
You may be able to deduct amounts for advertising that your property is for rent.
Line 8690- Insurance
You can deduct premiums for insurance coverage on your rental property for the current tax year.
Line 8710- Interest
Interest on the money you borrow to buy or improve a rental property may be tax deductible as well as the interest you paid to tenants on rental deposits. Certain fees when you get a mortgage to buy or improve your rental property may also be tax deductible. These include:
• Mortgage applications, appraisals and insurance fees • Mortgage guarantee fees • Mortgage brokers and finders fees • Legal fees related to mortgage financing
You can deduct these fees over a period of 5 years by deducting 20% in the current taxation year and 20% in each of the following 4 years.
Line 8960- Maintenance and Repairs
If you pay repairs or your property, you may be able to deduct the cost of labor and materials. Keep in mind that you cannot deduct the value of your own labor.
Line 8871- Management and Administration Fees
You can deduct the amount you pay for managing the property. You can also deduct amounts paid or payable to agents for collecting rents or finding new tenants.
Line 8810- Office Expenses.
There are many small office items that are tax deductible such as pens, stationary and stamps.
Line 8860- Legal Accounting and Other Professional Fees
You may be able to deduct fees for professional services to prepare leases, keep financial records and/or collect overdue rents.
Line 9180- Property Taxes
You can deduct property tax assessed by a Province or a Territory and by a Municipality that relates to your rental property for the period when it was for rent.
Line 9200- Travel
You might be able to claim travel to collect rents, supervise repairs and mange your properties. Ensure that you read this section carefully, as there are many requirements to meet.
Line 9060- Salaries and Wages
Deduct amounts paid or payable to superintendents, maintenance personnel and other employees who take care of your rental properties.
Line 9226- Utilities
You may be able to deduct expenses for utilities, such as gas, oil, electricity, water and cable. If your rental agreement specifies that you pay for the utilities. Ensure that you read this section carefully, as there are many requirements to be met.
Line 9270- Other Expenses
This section allows you to deduct all other expenses that you incur to earn rental incomes. An example might be the landscaping costs for the current year.
By coming up with creative tax strategies an investor can save both time and money come tax season. By knowing tax laws, you can structure your income, expenses and transactions to minimize possible income tax liabilities. Furthermore, by learning the details of property tax laws before you renovate a property you are able to make improvements that are focused around keeping your assessments down while enhancing the desirability of your property for tenants.