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Email this3:37 pm
December 1, 2017
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Hi,
Looking for some advice regarding my upcoming taxes for 2018. From 2014 to March 2018 I lived in the basement suite of my house and rented the top floor. In March I bought and moved into another house and began renting out the basement suite of my original house so that the full thing is rented. I am having a hard time finding literature and advice online regarding this type of scenario and how it will affect my tax filing. Specifically if this is considered a change in use / deemed disposition. I should note that while living in the basement suite I claimed rental income and expenses based on a 70/30 split as the basement suite makes up 30% of the house and the main floor rental suite made up 70%. Thanks for the tips!
4:00 pm
February 17, 2013
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Been a long time since I've been a landlord. I'd get an accountant if I were you (a real accountant, not some student at H&R Block). He can also give you advice on how to maximize your deductions for your mortgage and expenses, as those changed when you moved out. Found the best thing to do is dump all the receipts on his desk and let him figure it out. He also gave me some deductions I wasn't aware of. As I recall, his fee is tax deductible as well, but like I said, that was a long time ago.
I would think that for the 1st 3 months of this year, your allowable deductions will be different from the rest of the year as it was your principal residence, and they may ding you with capital gains for a percentage from 2014 to 2018 and moving forward on your rental property.
Once you are a landlord, you are like a small business and get the benefits not available to Joe taxpayer. It was too complicated for me, and my accountant actually saved me taxes (tax??).
Go professional and get it done right. Don't wait until filing time. Talk to one now and find out what deductions are available for you to declare and start saving receipts if you haven't already.
4:13 pm
September 11, 2013
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shady, if you want to educate yourself you could start with CRA's Rental Income Guide T3046 - see page 28 re the specific issue you asked about, change of use.
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036.html
5:11 pm
April 6, 2013
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The section on page 28 of the Rental Income Guide Bill mentioned begins as follows:
Change in use
You can be considered to have sold all or part of your property even though you did not actually sell it.
For example, this is the case when:
• you change all or part of your principal residence to a rental property;
• you change your rental property to a principal residence; or
• you stop using a property to earn or produce income.Every time you change the use of a property, you are considered to have sold the property at its fair market value and to have immediately reacquired the property for the same fair market value, unless you make an election as described below. The resulting capital gain or capital loss (in certain situations) must be reported in the year the change of use occurs.
…
6:39 pm
September 11, 2013
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shadys, just in general: yes, there is a change of use in March 2018 but in my mind there's no tax effect (assuming no CCA was ever claimed re the 30% part of the house you lived in) this year because there's no capital gains tax for the time you used a property or portion thereof as a principal residence. That's just my opinion, based on your facts, but please realize that's all it is, just my opinion.
Note this paragraph which comes right after the one cited by Norman1 above, which seems to support my view:
"If the property was your principal residence for any year you owned it before you changed its use, you do not have to pay tax on any gain that relates to those years. You only have to report the gain that relates to the years your home was not your principal residence."
Page 29 goes on to refer to possible principal residence designation for the part of the house that was your principal residence, to what happens in the future when it's sold or if use changes again, and other issues, so make sure to read it too. Again, this is all just my understanding re your specific question, i.e. I believe there's no tax to pay on this change of use in 2018, but you'd be wise to consult with someone who works in this area.
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