What are the tax implications when selling a rental property?
As a general rule, a supply of real property situated in Canada, including residential property, is taxable unless the transaction is specifically exempted. The small supplier provisions do not apply to sales of real property.
What is required for proof of Revenue & Expenses?
- Original documents are required when providing proof
- Contracts
- Bank deposit slips
- Receipts, invoices, and/or statements
Your proof should indicate:
- The amount and date received
- Source of the income (name and address)
- Full description of the goods or services
- Vendors business number if they are a GST/HST registrant
The following are deductible and non-deductible expenses:
Deductible Expenses
- Capital Expense (purchase price of rental property)
- Loan, Legal Fees & Interest
- Property Taxes
- Insurance taxes (Up to 40%)
- Utilities
- Prepaid Expenses
- Advertising & Promotions
- Office Expenses
- Furniture & Equipment
- Management & Administrative Expenses
- Salaries, Wages, & Benefits
- Motor Vehicle
- Repairs & Maintenance
- Travel & more
Deductible Expenses
- Land Transfer Tax
- Mortgage Principal
- Penalties
- Value of your own labour
- Personal portion of expenses
Capital cost allowance (CCA) for rental property
You might acquire a depreciable property, such as a building, furniture, or equipment, to use in your rental operation. You cannot deduct the cost of the property when you calculate your net rental income for the year. However, since these properties wear out or become obsolete over time, you can deduct their cost over a period of several years. This deduction is called capital cost allowance (CCA).
Selling your rental property
If you buy or sell a rental property, insure to keep all records, as well as the name’s, amount it was sold/bought for, and the date of the transaction. If you sell a rental property for more than it cost, you may have a capital gain. List the dispositions of all your rental properties on Schedule 3, Capital Gains (or Losses).
If you are a member of a partnership that has a capital gain, the partnership will allocate part of that gain to you. The gain will show on the partnership’s financial statements or in box 151 of your T5013 slip. You cannot have a capital loss when you sell depreciable property. However, you can have a terminal loss.
Some helpful links include:
Business Records
If you have any questions please call our office at (250) 334-3797 or send us an email at office@ashcroftassociates.ca
