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Rental Expenses and CCA

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We've had rental income for several years but only ever had maintenance costs.  Now purchased two  rental homes  in 2016 and I have NO IDEA how to include the following as i think these expenses have to go under a capital expense?

- legal fees to purchase the property

- renovation costs to put in new kitchen in basement apt.and other renos to basement unit (or does paint, blinds etc count as maintenance as it's not increasing the value, just fixing existing?)

- new roof on garage - my understanding is it's maintenance not CCA as we just fixed existing, not upgraded

- I have no idea what category of CCA these things fall under or how to enter them.

 

Just read on Can Revenue about CCA and it says "You cannot use CCA to create or increase a rental loss."   So if we bought one property in Nov 2016 and had legal expenses to buy it that are more than what we got in rent (because it was only rented in dec) does that mean I cannot claim my legal costs to purchase?

 

Many thanks if anyone can walk me through this!

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We've had rental income for several years but only ever had maintenance costs.  Now purchased two  rental homes  in 2016 and I have NO IDEA how to include the following as i think these expenses have to go under a capital expense?

- legal fees to purchase the property

- renovation costs to put in new kitchen in basement apt.and other renos to basement unit (or does paint, blinds etc count as maintenance as it's not increasing the value, just fixing existing?)

- new roof on garage - my understanding is it's maintenance not CCA as we just fixed existing, not upgraded

- I have no idea what category of CCA these things fall under or how to enter them.

 

Just read on Can Revenue about CCA and it says "You cannot use CCA to create or increase a rental loss."   So if we bought one property in Nov 2016 and had legal expenses to buy it that are more than what we got in rent (because it was only rented in dec) does that mean I cannot claim my legal costs to purchase?

 

Many thanks if anyone can walk me through this!

 

Legal fees to purchase property are added to the capital cost of the property.  Legal legal fees paid when selling are deducted from your proceeds of disposition when used to calculate capital gain or loss.  In short, no the CRA does not consider them a current expense. Election to use CCA is your choice.  You do not have use it.  If you do decide to depreciate the property (Class 1), there are implications when you sell.  I personally don't use it.

 

from the financial post:

"CCA is an election, meaning that it is the taxpayer’s choice whether or not to use it. The drawback to CCA is that it is recaptured in the year you sell your property, meaning that the historical CCA you’ve taken will be added back on income account to your tax return if you sell the property for anything more than your current un-depreciated capital cost (i.e. the cost of your property less the CCA claimed on prior tax returns)."

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thanks.  So can I claim all expenses to replace the kitchen (basic replacement of 30 year old cabinet and laminate countertop, etc not upgrading to granite or anything like that?  I'd prefer not to have to get into CCA as it is complicated.

Questions can these all be considered current expenditures:

- replaced 30 yr old leaking toilet and vanity and tap in bathroom

- replaced 30 yr old cabinets with new and laminate counter (not granite)

-  replaced washer and dryer

- replaced front door for better insulation and more security

- replaced roof on garage due to rot

 

are these all maintenance items?  or do any HAVE to be considered CCA?

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