Rental Property and Tax Deductions.

When it comes to rental income and tax write off’s there are two expense categories, one is current expenses, the other is capital expenses.

A question that pops up occasionally is: Can I claim expenses if I had no rental income? yes, you can. Sometimes we own rental property but we are unable to rent the property out during part of the tax year or perhaps we purchased the rental property mid year and we did some fixing up, as well, we incurred current expenses.

Some people think they are unable to claim their current expenses because there is no rental income for those expenses to go against however, when we have rental expense and no rental income the expense can be used against other income. You will find this information in the T4036 guide on the CRA website.

when you have rental property it is best that you see a professional to have your taxes completed because you really need to know the difference between a current expense and a capital expense in order to complete your return correctly.

Also, it has been brought to our attention that a popular software will automatically delete all your rental expenses if you select no rental income. If you have been using income tax software you purchased from a retailer, and you feel this may have happened to you, please send us an email and one of our associates will contact you.

Now, what are current expenses, and capital expenses, and how do I claim them?

Current Expenses are expenses that pop up every now and then like staining a deck, or minor repairs. Other normal deductions would be property tax, bookkeeping fees, utilities (if it Stages in the rental agreement you will be paying them), lawyer fees, advertising, insurance.

Capital expenses are expenses that improve and add value to the property such as; building a deck, updating windows, the purchase price of rental property etc.

Expenses are not always black-and-white, vehicle expenses for example are quite complex for rental property owners.

We highly advise speaking with a professional when completing your income tax return.