# Claiming CCA on rental property



## LateBloomer (Dec 29, 2011)

Hi all,

I've been reading these forums for a little while now and have finally decided to post a question. Great job in general everyone, this forum is full of useful info! 

Now from everything I read, it seems that most people do not recommend claiming CCA on a rental property that's gaining value because of the recapture at sale. But in my case, I'm thinking it makes sense and am looking for a sounding board to bounce the idea off of.

I've owned a rental property (condo) for the last 3 years, and my total yearly income is high enough that I'm being taxed in the highest bracket. I have never claimed CCA.
This year, instead of getting a return I ended up owing the government a small amount (about $1.5k) when doing my 2011 taxes.

I'm thinking of refiling and claiming CCA on the rental in order to get money back. My logic here is:

Why pay tax now when I can pay it later?
I'm planning on owning the rental property for a very long time and by the time I sell (if I sell...), my tax bracket will probably be lower than what it is now

So is this a bad idea? Please share your thoughts. Thank you!


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## man849johs (Jul 7, 2012)

The amount of CCA you can claim depends on the type of rental property you own and the date you acquired it.

You group the depreciate property you own into classes. A different rate of CCA applies to each class. The main classes of depreciate rental property and the rates that apply to each class are discussed in Rental - classes of depreciate properties.

In most cases, you should use the declining balance method to calculate your CCA. This means that you claim CCA on the capital cost of the property minus the CCA, if any, you claimed in previous years. The remaining balance declines over the years as you claim CCA.


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## Plugging Along (Jan 3, 2011)

I've looked into this with my accountant. We do claim CCA as we are in the highest tax bracket, and plan to hold very long term. Her thoughts are exactly as you said, we can get the tax benefit in todays dollars, which is worth more than later, which is an unknown. In the years that we had lower income, we did not claim CCA, and just paid the tax.


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## cardhu (May 26, 2009)

LateBloomer ... you're quite right, the default advice is usually to avoid claiming CCA to avoid recapture ... but that's not always the right advice ... the CCA deduction/recapture process shares certain attributes with another program that only a handful of zealots recommend against ... the RRSP ... in both cases, you take a deduction now, and take some amount into income later, and in both cases, the key variable that influences its effectiveness is the differential between tax rates at front & back ends ... the CCA recapture is effectively another form of tax deferral ... the key difference is that with RRSP you have FAR more control over the "recapture" end of the equation ... you can dribble RRIF withdrawals out over the course of decades, whereas a CCA recapture will occur all at once, in the year that you sell the property ... even with the single lump sum recapture, though, it can still make sense in some cases ... if you sell a property, on which you've claimed CCA, during a year in which your income is low, it can work out ... and if you are taking your deductions while in the highest tax bracket, there is very little, if any, potential downside ... if the tax rate you'll pay on recapture is the same as the tax rate you're paying now, then its a no-brainer .... defer the tax.


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## TaxGuy (Apr 7, 2009)

cardhu said:


> LateBloomer ... you're quite right, the default advice is usually to avoid claiming CCA to avoid recapture ... but that's not always the right advice ... the CCA deduction/recapture process shares certain attributes with another program that only a handful of zealots recommend against ... the RRSP ... in both cases, you take a deduction now, and take some amount into income later, and in both cases, the key variable that influences its effectiveness is the differential between tax rates at front & back ends ... the CCA recapture is effectively another form of tax deferral ... the key difference is that with RRSP you have FAR more control over the "recapture" end of the equation ... you can dribble RRIF withdrawals out over the course of decades, whereas a CCA recapture will occur all at once, in the year that you sell the property ... even with the single lump sum recapture, though, it can still make sense in some cases ... if you sell a property, on which you've claimed CCA, during a year in which your income is low, it can work out ... and if you are taking your deductions while in the highest tax bracket, there is very little, if any, potential downside ... if the tax rate you'll pay on recapture is the same as the tax rate you're paying now, then its a no-brainer .... defer the tax.


I agree 100%.

CCA make sense if your marginal rate today is likely the same as it will be when you sell.


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