Capital Cost Allowance
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Is year 4 = Year 1 ???
When I acquired properties 4 years ago,
I didn`t complete T776 Page 2 Area B - Details of equipment and other property additions in the year.
So to start claiming CCA for Tax year 2008. How should I do it? Should I file an Adjustment for tax year 2005 for these properties?Should I file an Adjustment for other properties even if I don`t want to claim CCA on them?
Thank you.
I didn`t complete T776 Page 2 Area B - Details of equipment and other property additions in the year.
So to start claiming CCA for Tax year 2008. How should I do it? Should I file an Adjustment for tax year 2005 for these properties?Should I file an Adjustment for other properties even if I don`t want to claim CCA on them?
Thank you.
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QUOTE (hazed @ Apr 11 2009, 10:54 AM) I acquired 2 new rental properties in 2008. Do most people claim this CCA on most rentals? Doesn`t it affect how you report the capital gain when it`s sold?
Yes, you have to add the CCA back when you sell. However, I`ve been advised that it`s better to have cash in hand now (i.e. if you can use your CCA to reduce your net income and pay less tax now) than worry about your future capital gain. What do others think?
Yes, you have to add the CCA back when you sell. However, I`ve been advised that it`s better to have cash in hand now (i.e. if you can use your CCA to reduce your net income and pay less tax now) than worry about your future capital gain. What do others think?
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We have never taken CCA in the past, but will do so beginning next year, as it seems to me that inflation will make that a good investment, ie the money in our hands now will buy more than it will in the future when we sell.
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Hi,
Basic question -
Assuming the following example: business is a Corporation. property was purchased for 100K and sold for 150K (assuming no CCA for simplicity):
- Is it true you pay tax on 50% of the capital gain which is 25K? what is the tax % (approximately of course) assuming that is the only profit the corp had that year?
around 20% ($5K) OR around 40% ($10K)?
This will help me explain something important about the dilemma Garth has raised re: taking CCA today or when selling...
Regards,
Neil
Basic question -
Assuming the following example: business is a Corporation. property was purchased for 100K and sold for 150K (assuming no CCA for simplicity):
- Is it true you pay tax on 50% of the capital gain which is 25K? what is the tax % (approximately of course) assuming that is the only profit the corp had that year?
around 20% ($5K) OR around 40% ($10K)?
This will help me explain something important about the dilemma Garth has raised re: taking CCA today or when selling...
Regards,
Neil
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changed my mind. do not want to add my opinion due missing experience.
If your capital gain is $50K - your taxable portion in the corporation is $25K. You pay corp tax at the highest rate then you get a RDTOH based on the dividends you declare adn then it varies by province- so it is more complicated then saying -what is the %. Then you have to worry about delcaring capital dividends- feel lost! it is ok- this is why you need an accountant when you are working with corps and that is why properties in corps have higher accounting fees!
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Thanks Navaz.
You pay tax on 100% of the annual (net) income and only on half of the capital gain!
Therefore, isn`t that another good reason to take CCA from the beginning in addition to the reason Garth mentioned?
I guess one exception is if initially you show losses even without taking CCA - in this case perhaps save CCa for later(?)
Neil
You pay tax on 100% of the annual (net) income and only on half of the capital gain!
Therefore, isn`t that another good reason to take CCA from the beginning in addition to the reason Garth mentioned?
I guess one exception is if initially you show losses even without taking CCA - in this case perhaps save CCa for later(?)
Neil
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QUOTE (investmart @ Apr 11 2009, 06:27 PM) Thanks Navaz.
You pay tax on 100% of the annual (net) income and only on half of the capital gain!
Therefore, isn`t that another good reason to take CCA from the beginning in addition to the reason Garth mentioned?
I guess one exception is if initially you show losses even without taking CCA - in this case perhaps save CCa for later(?)
Neil
Neil, when you sell the property, the CCA added back is a recovery of the CCA that you deducted over the previous years, so it is added to income and not into your Capital Gains. Hence no difference in tax rate between choosing to deduct CCA or not.
You pay tax on 100% of the annual (net) income and only on half of the capital gain!
Therefore, isn`t that another good reason to take CCA from the beginning in addition to the reason Garth mentioned?
I guess one exception is if initially you show losses even without taking CCA - in this case perhaps save CCa for later(?)
Neil
Neil, when you sell the property, the CCA added back is a recovery of the CCA that you deducted over the previous years, so it is added to income and not into your Capital Gains. Hence no difference in tax rate between choosing to deduct CCA or not.
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QUOTE (Nicola @ Apr 10 2009, 09:05 PM) Yes, you have to add the CCA back when you sell. However, I`ve been advised that it`s better to have cash in hand now (i.e. if you can use your CCA to reduce your net income and pay less tax now) than worry about your future capital gain. What do others think?
for tax purposes use it to get annual taxable income to 0 .. but not more ..
for tax purposes use it to get annual taxable income to 0 .. but not more ..
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Thanks for the correction Garth, I confused Capital Expense with CCA. haven`t sold any property yet except one to my ex
You are absolutely right then and I would add Thomas great advice: use it (CCA) today as long as annual taxable income is above 0.
(my explanation earlier is still relevant in explaining something else: the difference in benefits from Current VS. Capital expense. well I`m sure most investors are already well aware of that very important difference/tax implication)
Regards,
Neil
You are absolutely right then and I would add Thomas great advice: use it (CCA) today as long as annual taxable income is above 0.
(my explanation earlier is still relevant in explaining something else: the difference in benefits from Current VS. Capital expense. well I`m sure most investors are already well aware of that very important difference/tax implication)
Regards,
Neil
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The tax implications of investment properties is something I would like to learn more about (my wife and I recently purchased our first property, and are actively looking for our second).
We`ve purchased our property as individuals (i.e. not through a corporation). I`m a salaried employee, my wife is self-employed.
Can anyone recommend a layman`s guide to the tax implications of investment properties?
Moe
We`ve purchased our property as individuals (i.e. not through a corporation). I`m a salaried employee, my wife is self-employed.
Can anyone recommend a layman`s guide to the tax implications of investment properties?
Moe
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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.
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.