# Principal residence as rental...what expenses are deductable?



## mitcgeof (Dec 22, 2014)

I currently use the basement of my principal residence for a rental business...I have read the cra website regarding expenses and have a few questions for any knowledgable individuals who might be out there. My percentage allocation to rental is 40%; I am assuming if I reshingle the roof then that % is deductible from the cost to repair? Is the finance fee for setting up a heloc to pay for it covered? Can I deduct the interest in the heloc? What about other general landscaping (parking spot for tenant and re-leveling so that water doesn't run into the basement)? How about replacing the fence since the tenant has a dog? The cra website states that most of these should be covered by my interpretation...am I way off?


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## stardancer (Apr 26, 2009)

If the apartment takes up 40% of the space in your house, then that's the % you would use. You would report the full amount of repairs and maintenance on the T776, then deduct 60% as personal. If the repair is within the rental apartment, it is 100% deductible. The finance fee for setting up the heloc is not deductible as that is a personal account. However, the interest on the heloc for repairing the roof is deductible at 40%. If you use the heloc for the roof, do not use it for anything (especially personal) else until the loan is gone. It can be difficult to calculate and keep the different interest amounts separate.

General landscaping is deductible at 40%, as it is enjoyed by both tenant and landlord. Something like re-leveling and paving would be a capital expense, again at 40%, not a general expense. I would consider replacing the fence as a capital expense also, again at 40%.

http://recherche-search.gc.ca/rGs/s...m=10&langs=eng&st1rt=0&s5bm3ts21rch=x#wb-land


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## Just a Guy (Mar 27, 2012)

Of course, when you go to sell, you will have to pay tax on 40% of the capital gains you get from the sale of your house. 

You aren't allowed to double dip. If you claim one benefit (deducting the expenses as you go) you can claim the tax free status later. 

This may of course be a good thing in the long run if you buy at the peak and sell at a loss.


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## keepupwiththejones (Nov 16, 2014)

No, they won't pay tax on the 40%. It still qualifies as tax free capital gains.


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## Just a Guy (Mar 27, 2012)

Not if you write off parts of it. It's the same with people who write off part of their homes for business. Of course cra doesn't always catch or enforce it...but that's not the same, and they can come back later and reassess.


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## nobleea (Oct 11, 2013)

Since it's less than 50% of the home, I believe he qualifies for the full capital gains exemption of a principal residence. Since he lives in the main part of the house and the rental is ancilliary to his use of the home as principal residence, he qualifies for the full exemption. There was a bulletin from CRA on this, but I can't find it at the moment.
Only applies if you don't elect to claim CCA on the rental portion.


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## Just a Guy (Mar 27, 2012)

Ahh, explains why I have an accountant.


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## Homerhomer (Oct 18, 2010)

nobleea said:


> Since it's less than 50% of the home, I believe he qualifies for the full capital gains exemption of a principal residence. Since he lives in the main part of the house and the rental is ancilliary to his use of the home as principal residence, he qualifies for the full exemption. There was a bulletin from CRA on this, but I can't find it at the moment.
> Only applies if you don't elect to claim CCA on the rental portion.


+1


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