How to Prepare Tax Returns For Rental Properties in Canada

Complete Form T776

– Expenses should be incurred for earning rental income
– The amount of the expense should be reasonable

The most common expenses that can be deducted are:
– Bank charges
– Insurance
– Maintenance and repairs
– Utilities

                You can claim Capital Cost Allowance (CCA) for the property itself or Capital Expenses

The CRA rule regarding current expenses vs. capital expenses is that if an item is replaced/repaired to its original state and adds no additional value to the property, it is a current expense. If an item is replaced with an upgrade of longer lasting value, it is a capital expense.  The items you noted, would fall under capital expense – Class 8.

Commonly used CCA classes, their descriptions and rates
Class Rate (%) Description
1 4 Most buildings you bought after 1987 and the cost of certain additions or alterations made after 1987
8 20

Property that you use in your business and that is not included in another class.

Also included is data network infrastructure equipment and systems software for that equipment acquired before March 23, 2004. For more information, go to Class 8 (20%) and Class 46 (30%).

10 30 General-purpose electronic data-processing equipment (commonly called computer hardware) and systems software for that equipment acquired before March 23, 2004, or after March 22, 2004, and before 2005 if you made an election.
Motor vehicles and some passenger vehicles. For more information, go to Class 10 (30%) and Class 10.1 (30%).
10.1 30 A passenger vehicle not included in Class 10. For more information, go to Class 10.1 (30%).
12 100 The cost limit for access to Class 12 (100 %) treatment is $500 for tools acquired on or after May 2, 2006, and medical and dental instruments and kitchen utensils acquired on or after May 2, 2006. For more information, go to Class 12 (100%).

 

if you claim class (1) at the time of sale of property , all of the previous CCA claimed must be recaptured into taxable income and is therefore subject to tax.

The net income from  calculated on form T776 should be entered on   line 12600 (line 126 prior to 2019) of your income tax

URL:https://madanca.com/blog/how-to-prepare-tax-returns-for-rental-properties-in-canada/

Completing Form T776, Statement of Real Estate Rentals

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/completing-form-t776-statement-real-estate-rentals.html

T776 Tax Form: Statement of Real Estate Rentals

https://turbotax.intuit.ca/tips/t776-tax-form-statement-of-real-estate-rentals-414

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Capital cost allowance (CCA) –  depreciable property like a building, furniture or equipment to use in your rental activity. Since these properties wear out or become obsolete over time, you can deduct the cost over a period of several years. This deduction is called CCA.

Capital property – generally any property, including depreciable property, you buy for investment purposes or to earn business income. Common types of capital property include principal residences, cottages, stocks, bonds, land, buildings and equipment used in a business or rental operation.

Rental operation – services you provide within your rental property to your tenants such as heat, lighting, laundry, cleaning or security.

 

Chapter 3 – Expenses

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Anderson: The Ultimate Guide to Airbnb and Short Term Rental Tax Deductions

URL: https://andersonadvisors.com/short-term-rental-tax-deductions/

CCA classes

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/classes.html

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/classes-depreciable-property.html

Capital cost Allowance – Class 8 Property

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it472/archived-capital-cost-allowance-class-8-property.html

How to Calculate CCA (Capital Cost Allowance)

https://www.liveabout.com/how-to-calculate-capital-cost-allowance-2948635

CCA classes

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/classes.html

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Turbo Tax: Rental Property Expenses: Current or Capital?

https://turbotax.intuit.ca/tips/rental-property-expenses-current-or-capital-6379

GST/HST rates

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-collect-which-rate.html

GST/HST for digital economy businesses: Overview

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy.html

Rental Income    From: Canada Revenue Agency

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036/rental-income.html#DIEP

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PST

British Columbia Corporation Tax Calculation

PST: https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2sch427.html

British Columbia – Provincial corporation tax

 
This page explains how PST and MRDT (Municipal and Regional District Tax) apply to sales of accommodation in B.C.
 
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Rental of Real Property by Individual

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it434rsr/archived-rental-real-property-individual.html

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CRA: Rental income or business income

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/you-have-rental-income-business-income.html

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Capital Gains

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html

All Your Questions About Capital Gains and Taxes, Answered

https://turbotax.intuit.ca/tips/capital-gains-tax-in-canada-14192

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airbnb: Tax collection and remittance by Airbnb in Canada

GST+ PST + municipal Tax = 5%+8%+3%

  • Goods and Services Tax (GST), Harmonized Sales Tax (HST), and/or Quebec Sales Tax (QST): 5–15% of the listing price including any cleaning fees for stays 30 nights and shorter. If you only host stays for longer than one month, taxes will not be charged on the accommodation. Guest fees are also subject to the 5–15% GST, HST and/or QST. For detailed information, please visit the Government of Canada website.
  • Airbnb is registered with the Canada Revenue Agency under business number 723689006 RT000100. Guests who need a tax registration number for the purposes of claiming a credit for their reservations (such as the Ontario Staycation Tax Credit) may use this number.

Province of British Columbia

Guests who book Airbnb listings that are located in the province of British Columbia, Canada will pay the following taxes as part of their reservation:

  • Provincial Sales Tax: 8% of the listing price including any cleaning fees and guest fees for reservations of 26 nights or fewer in the Province of British Columbia. For detailed information, please visit the British Columbia Sales Tax website.
  • Provincial Sales Tax: 7% of the applicable service fees. For detailed information, please visit the British Columbia Sales Tax website.
  • Municipal and Regional District Tax: 2–3% of the listing price including any cleaning fees and guest fees for reservations of 26 nights or fewer in the Province of British Columbia. For detailed information, please visit the British Columbia Sales Tax website.

https://www.airbnb.ca/help/article/2283

Why Airbnb is requesting your Canadian GST info

If a Host’s taxable sales amount is more than $30,000 CAD over four consecutive calendar quarters, they are required to register with Canada Revenue Agency for a GST/HST account (and in Québec, a QST account) within 30 days of reaching the $30,000 CAD threshold.

https://www.airbnb.ca/help/article/3198#:~:text=Airbnb%20encourages%20you%20to%20provide,any%20listing%20located%20in%20Canada.

Airbnb service fees

https://www.airbnb.ca/help/article/1857/

Understanding the tax implications for Airbnb hosts
URL: https://doppleronline.ca/huntsville/understanding-tax-implications-for-airbnb-hosts-bdo-scott-conner/

DNV Disctrict of North Vancouver – Short-term rental accommodations
https://www.dnv.org/government-administration/short-term-rental-accommodations

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Income sprinkling

https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/income-sprinkling/frequently-asked-questions-income-sprinkling.html

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