- Joined
- Feb 9, 2009
- Messages
- 83
QUOTE (Dan_Eisenhauer @ May 24 2009, 01:28 PM) Hi Moe;
In layman`s language... and I certainly fall into that category when it comes to taxes... if you own the properties in your own names, you take the income derived from those properties into your own income, using whatever the form # is to report that income in your own return.
As an individual investment property owner, you can use CCA from each property to write the income of that property down to zero, but no farther. In other words, you cannot use CCA to create a loss for use on income from other sources. At some point, the amount of deductible CCA will not be sufficient to reduce income to zero, and you will begin paying income tax on the net income after CCA.
When you sell the property you will have to recapture the CCA which was previously claimed. That recaptured CCA will be added to your income for the year in which the sale took place.
Oh, one other point, in the first year of ownership you may only claim 1/2 of the normal CCA. Whether you close on January 1 or December 31, you can only use 1/2 of the normal CCA for that year, assuming there would be income to deduct it from. Buyers who are tax conscious will often postpone a purchase to the second half of the year for that reason. (I am not suggesting that is a good reason for buying in the second half. It does happen, though.)
Hope this helps.
Thanks for the information, Dan - very helpful.
It does contradict what I`ve been told about attributing real estate expenses to personal (i.e. salaried) income, though. I`ve been told that it`s possible to reduce job income with investment properties. (I believe they were referring to deducting property expenses from job income.)
Have I been misled?
Moe
In layman`s language... and I certainly fall into that category when it comes to taxes... if you own the properties in your own names, you take the income derived from those properties into your own income, using whatever the form # is to report that income in your own return.
As an individual investment property owner, you can use CCA from each property to write the income of that property down to zero, but no farther. In other words, you cannot use CCA to create a loss for use on income from other sources. At some point, the amount of deductible CCA will not be sufficient to reduce income to zero, and you will begin paying income tax on the net income after CCA.
When you sell the property you will have to recapture the CCA which was previously claimed. That recaptured CCA will be added to your income for the year in which the sale took place.
Oh, one other point, in the first year of ownership you may only claim 1/2 of the normal CCA. Whether you close on January 1 or December 31, you can only use 1/2 of the normal CCA for that year, assuming there would be income to deduct it from. Buyers who are tax conscious will often postpone a purchase to the second half of the year for that reason. (I am not suggesting that is a good reason for buying in the second half. It does happen, though.)
Hope this helps.
Thanks for the information, Dan - very helpful.
It does contradict what I`ve been told about attributing real estate expenses to personal (i.e. salaried) income, though. I`ve been told that it`s possible to reduce job income with investment properties. (I believe they were referring to deducting property expenses from job income.)
Have I been misled?
Moe
