# Depreciation on a Rental Property



## Fain (Oct 11, 2009)

Hi, 

I bought a rental property in hamilton in 2014. It cost 185,000 and is a 3 bedroom semi-detached house. How much depreciation can i claim on it? Anyone else with experience in this?

Anyone have examples of what they've done?


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## OhGreatGuru (May 24, 2009)

See thread http://canadianmoneyforum.com/archive/index.php/t-2264.html

I believe there is also a discussion there that technically it is a Capital Cost Allowance (CCA) , not a depreciation per se that you can "claim on it".


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## gt_23 (Jan 18, 2014)

Fain said:


> Hi,
> 
> I bought a rental property in hamilton in 2014. It cost 185,000 and is a 3 bedroom semi-detached house. How much depreciation can i claim on it? Anyone else with experience in this?
> 
> Anyone have examples of what they've done?


Its class I capital property, so 4% a year on a declining balance (not straight line basis). You don't have to claim the full 4% if you don't want to and you can only claim 50% depreciation in the first year you own it. You can also add in closing & construction costs, etc, to the purchase price, less the estimated value of the land.


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## Fain (Oct 11, 2009)

gt_23 said:


> Its class I capital property, so 4% a year on a declining balance (not straight line basis). You don't have to claim the full 4% if you don't want to and you can only claim 50% depreciation in the first year you own it. You can also add in closing & construction costs, etc, to the purchase price, less the estimated value of the land.


Thanks! got another question also. How does one figure out how much the building is worth and how much the land is worth? is that on the appraisal or...


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## gt_23 (Jan 18, 2014)

Fain said:


> Thanks! got another question also. How does one figure out how much the building is worth and how much the land is worth? is that on the appraisal or...


If you have an appraisal, there's a section called "cost approach" where you can find the appraisers land value. Alternatively, you can just ask a realtor and give him the lots dimensions. It doesn't have to be perfect.

You're probably looking at $30-50k for Hamilton semi lot.


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## Guban (Jul 5, 2011)

Remember that if you take the CCA on the property, you may face a recapture when it is sold. Given that property values just seem to be going up and up, this is a very real concern.


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## Cal (Jun 17, 2009)

Probably a discussion you should have with your accountant.


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## Fain (Oct 11, 2009)

Cal said:


> Probably a discussion you should have with your accountant.


I posted as i was curious for information, i don't need you to tell me to go somewhere else.


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## Cal (Jun 17, 2009)

Fain said:


> I posted as i was curious for information, i don't need you to tell me to go somewhere else.


Fine, don't ask a tax professional about the tax consequences of your investment property. Good luck with that.

I personally have the greatest of confidence in my accountant, lawyer and RE agent, I consider them part of my team, and I truly appreciate their professional advice.


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## Fain (Oct 11, 2009)

Cal said:


> Fine, don't ask a tax professional about the tax consequences of your investment property. Good luck with that.
> 
> I personally have the greatest of confidence in my accountant, lawyer and RE agent, I consider them part of my team, and I truly appreciate their professional advice.


I didn't mean to come across as mean. But it didn't really help with my question at all. I'm aware I can always pay a professional to get my answers but it doesn't always make sense in some cases. Instead i'm asking others who may have experience in the real estate game to save me a few hundred dollars in advice.


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## Davis (Nov 11, 2014)

You may well be aware that you can and should get advice from a professional, but not everyone does know that. It wasn't evident from your question, so Cal couldn't know your level of knowledge. He wanted to make sure that wouldn't make an important decision without getting the right information. Snapping at people who take the time to try to help you is a good way of ensuring the people don't bother the next time you have a question.


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## Just a Guy (Mar 27, 2012)

Fain said:


> I didn't mean to come across as mean. But it didn't really help with my question at all. I'm aware I can always pay a professional to get my answers but it doesn't always make sense in some cases. Instead i'm asking others who may have experience in the real estate game to save me a few hundred dollars in advice.


Most accountants will answer questions like this without charging. Plus, you get the benefit of knowing the information is correct and up to date.

The rules change all the time, it's why I have an accountant even though I've been in real estate for years. 

I have found that "but I read it on the Internet" doesn't hold much water with CRA...even if an accountant charged you, it may be better than what CRA charges you if you get wrong advice.


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## gt_23 (Jan 18, 2014)

Fain said:


> I didn't mean to come across as mean. But it didn't really help with my question at all. I'm aware I can always pay a professional to get my answers but it doesn't always make sense in some cases. Instead i'm asking others who may have experience in the real estate game to save me a few hundred dollars in advice.


The decision whether to depreciate the cost of a rental property is a complex one, usually requiring a number of assumptions including how long you intend to hold the property. From the details you provided and the way you posed your question, I took it as implied that you had already made that decision (i.e. you had chosen to depreciate). Lots of people regularly handle these types of decisions on their own without an accountant, but if you do choose to get an opinion you should realize that you'll never find consensus among accountants on this issue (I'm a CA but don't work as an accountant).

One of the problems in this forum is all the noise in the threads. You can ask any question related to real estate or RE investment and 9/10 responses will be telling you that you shouldn't buy it to begin with, completely unrelated to the question. I find it better to just disregard, rather than engage in these cases. Some people have way too much time on their hands and/or any multitude of motives.


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## gt_23 (Jan 18, 2014)

Just a Guy said:


> Plus, you get the benefit of knowing the information is correct and up to date.


Correct and up to date should be used rather loosely. My dad got reassessed for $30k last year thanks to his accountant's (20+ years exp) "correctness."


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## Just a Guy (Mar 27, 2012)

True, there are bad "professionals" out there...they make sure their butts are covered and they aren't liable...but I can't stand accounting. I took math in school where 1+1 equaled two, not a four million dollar loss.


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## Guban (Jul 5, 2011)

Just a Guy said:


> True, there are bad "professionals" out there...they make sure their butts are covered and they aren't liable...but I can't stand accounting. I took math in school where 1+1 equaled two, not a four million dollar loss.


Reminds me of this account joke.

A businessman was interviewing applicants for the position of divisional manager. He devised a simple test to select the most suitable person for the job. He asked each applicant the question, "What is two and two?" The first interviewee was a journalist. His answer was "Twenty-two." The second was a social worker. She said, "I don't know the answer but I'm glad we had time to discuss this important question." The third applicant was an engineer. He pulled out a slide rule and showed the answer to be between 3.999 and 4.001. The next person was a lawyer. He stated that in the case of Jenkins v. Commr of Stamp Duties (Qld), two and two was proven to be four. The last applicant was an accountant. The business man asked him, "How much is two and two?" The accountant got up from his chair, went over to the door and closed it, then came back and sat down. He leaned across the desk and said in a low voice, "How much do you want it to be?" He got the job.

http://www.lifehealthpro.com/2012/04/17/7-great-accountant-jokes?t=life-planning-strategies&page=6


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## CharlesF.Donahue (Jan 7, 2015)

gt_23 said:


> Its class I capital property, so 4% a year on a declining balance (not straight line basis). You don't have to claim the full 4% if you don't want to and you can only claim 50% depreciation in the first year you own it. You can also add in closing & construction costs, etc, to the purchase price, less the estimated value of the land.


I agree with gt_23. You can only claim 50% depreciation in the first year you own it.


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