Capital expenditure on rental property

[PeteH]

Hello,

Was wondering about capital expenditures on a rental property, can I simply keep a record of all the capital expenses (e.g. replace roof, front door, brick work etc) on the property over the years and then take the total lump sum deduction when I dispose the property in the future? Or should I be adding the capital expenses on the year it occurs to the CCA pool on the property and then slowly depreciate the CCA balance over the years? (But again, I thought depreciation expenses is up to the property owner to claim it or not?) 

Thanks in advance for any clarification.

[Geo123]

Hello PeteH,

If you have made repairs to your rental property, you must determine whether it is a capital or current expense.

We invite you to consult the CRA guide T4036 at the following link:

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036.html
 
If you have determined that this is a capital expenditure, please follow these steps:

1. On the "Left-side menu on the Interview tab", select the heading "Rental property income".

2. On this section, go to the sub-section entitled "CCA", which already contains the information on your building.

3. On the line for "Description and amount of capital additions", in the first field, enter the description of the item, then enter the amount of  it.

4. On the line for "Application of the half-year rule to the current year's additions", select the option that corresponds to the situation.

5. If you do not wish to claim the CCA for this expense, go to the line "Limit to the CCA of this class" and enter $ 0.00, otherwise enter the amount of CCA you wish to claim that is subjected to the deduction maximum allowable.

This expense will be carried over by the program on page 3 of Form T776, specifically in Area C of this form, and the amount will be added in column 3 of Area A.

[PeteH]

Hi Geo, 

Thanks for your response. 

So assuming I'm not going to claim any of the capital expenses in the previous years, I do not have to add them to "Limit of the CCA of this class" ? I can simply deduct the total lump sum capital expenses incurred over the years at disposition in the future? 

Thanks again,