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Tax on Real Estate Sales in Canada

Ever wonder how to deal with tax on real estate sales in Canada? If you own a rental property or a real estate investment in Canada, and have sold or are thinking of selling, then it is very important that you read this article because it provides helpful tax tips that can save you $$$ thousands.

Paying Capital Gains Tax – Tax on Real Estate Sales in Canada                                                      

When selling real estate for business use half of any profit made will be taxed.

When you sell an investment property in Canada you are required to pay capital gains tax on real estate sale in Canada. ‘Capital Gains Tax’ simply means that only half of the profit (i.e. gain) the sale of your real estate investment in Canada will be taxable.

For example, if the profit (gain) is $100,000 on a real estate sale in Canada, then only half of the gain ($50,000) would be taxable at your marginal tax rate.

Profit on the Sale of Real Estate Investments in Canada

How do you calculate the profit on real estate sales in Canada?

It is a very simple formula:

Net Sales Proceeds minus the Cost = Profit (Gain).

The Net Sales Proceeds is equal to the selling price less legal fees paid to your lawyer and commissions paid to your Realtor.

The cost is computed as the original purchase price, which should be shown on your purchase and sale agreement when you first bought the property, plus land transfer tax, legal fees paid and the cost of any improvements made to the property.

What are Improvements? – Tax on Property Sales in Canada

When computing year end tax on real estate sales in Canada, you should consider improvements. Improvements increase the cost of your property and therefore reduce the gain and tax on the sale of your real estate investment.

Improvements (also know as capital expenditures) are something that better the quality of the property or extend the life of your real estate investment in Canada. For example, if you replaced the windows on your property, then that is an improvement because it has extended the life of your property. Windows usually last 10 to 20 years.

Another example of an improvement would be replacing your old gas furnace with a high energy efficient furnace. That improves the quality of your property and therefore it is an improvement.

Repairs are not improvements and they would not increase the cost of your property for tax purposes. Repairs include fixing a leaky faucet or repairing a squeaky floor board. Repairs are tax deductible as a current expense on your tax return.

Capital Cost Allowance – Tax on Real Estate Sales in Canada

If you are considering selling a property in Canada, you must factor in depreciation, also known as Capital Cost Allowance. Depreciation represents the wear-and-tear on your property and is tax deductible.

When selling depreciable assets such as real estate in Canada, the Capital Cost Allowance that you claim in the prior taxation years must be included in your taxable income in the year of the sale. This is known as recapture. For example, if you claimed $100,000 of Capital Cost Allowance in prior taxation years, then $100,000 of previously claimed Capital Cost Allowance will be included in your taxable income in the year of sale.

Remember that when selling eligible CCA real estate in Canada, the sale must be reported on your personal tax return, including the capital gain realized and recapture. Since the tax on  sale of real estate sales and rental properties can be complex, I encourage you to engage the services of a Chartered Accountant in Mississauga / Toronto. If you are in the business of selling properties, you may want to know why you are not entitled to certain deductions. Get ready condo flippers, CRA is hunting you, will tell you why you pay higher taxes when selling property.

Different Tax Structures for Selling Rental Properties

The following video will illustrate the different tax structures available to individuals in Canada when selling real estate.

In Canada there are four different business structures to sell real estate. We will discuss how each structure can save you money on taxes when selling your properties.


Tax on Sole Proprietor When Selling Real Estate

Invest in low risk properties to prevent increased liability for a sole proprietor

The first way that a rental property in Canada can be acquired is through a sole proprietorship.  This means that you, the sole proprietor, is listed as the sole owner of the property on the deed of purchase.

Buying and selling real estate for tax purposes in Canada is simple for a sole proprietor. A sole proprietor will pay capital gains tax on real estate sales in Canada of a rental property.

The capital gain on the sale is reported on Schedule 3 and line 127 of your tax return.  In addition, you must complete form T776, Statement of Real Estate Rentals annually to report the profit earned from the property.

When should you consider becoming a sole proprietor? A sole proprietorship is appropriate when the property value is low and the risk is low. The reason for this is because a sole proprietor does not have limited liability protection. This means that you, as a sole proprietor, could lose all of your assets (home, car, savings, etc.) should a tenant sue you or another party sue you.

An example of a low risk and low value property is as follows:

- A good neighborhood

- Good quality of tenants

- House price is not material relative to your investment portfolio

 Tip: General liability insurance: will protect your business from lawsuits involving injuries or damages to customers, employees, vendors or visitors that occurs on your premises. You may want to consider investing in this type of insurance in real estate since tenant issues are fairly common.

General Partnership Tax on Real Estate Sales in Canada

A general partnership has more benefits with respect to capital gains tax on the disposition of real properties.

If you make your spouse a partner in your real estate business they can share the profit or loss similar to any other partnership. In order for your spouse to qualify as a partner the CRA requires they:

- Devote a reasonable amount of time to business

- Contribute cash to purchase the business assets

Example: John and Jane are married. John sells a rental property and as a result has a taxable capital gain of $150,000.

Without Partnership

This capital gain alone will put John in the highest federal tax bracket along with what other income he may have during the year. His effective tax rate would be 46.41% on the all income including the $150,000 taxable capital gain. Without income splitting he would be taxed $69,615 for the year.

With Partnership

If John makes Jane a partner in his real estate business, then he can transfer part of the capital gain to Jane. Instead of John claiming the $150,000 by himself it can now be split 50/50. Now both John and Jane would have taxable income of $75,000. By doing this John and Jane will be taxed at a lower marginal tax rate of 32.98%. John and Jane would have to pay $24,735 and a total of $49,470.


If John and Jane enter a partnership and split the capital gain they will save $20,145 in tax. Canada runs on a marginal tax system. The more you earn the more you will be taxed. By splitting your income or capital gains, you can take advantage of lower tax rates in Canada. The example used above is fairly common with respect to tax on real estate sales.

As a partnership you will only be required to fill out your T1 Personal Tax Return and form T776 Statement of Real Estate Rentals for rental income, similar to a sole proprietor. This makes it easy and simple for tax purposes with no registration needed. However there is unlimited liability with a partnership and if sued your personal assets will be at risk.

Make sure that you are investing in low risk properties to reduce liability.

Limited Partnership

A limited partnership is a legal entity where the investors own units representing their ownership interest in the partnership. The money from investors is pooled together so that the partnership has the funds to acquire a real estate investment.

Usually the limited partners do not know each other and do not take part in the management of the real estate. The day to day activities of the properties is left up to a general partner. Theses activities include:

When selling real estate in Canada through a Limited Partnership you are only liable for the amount you invested

- Collecting rent

- Paying mortgages and taxes

- Maintenance

- Repairs

- Upgrades

- All tenant management

For individuals looking for a hassle free real estate investment, a limited partnership is definitely the right choice.

Taxation on Real Estate for a Limited Partnership in Canada:

Partnerships relating to real estate sales do not pay tax in Canada. Instead, the income generated from the partnership is reported on the individual’s tax return. The CRA requires that a T5013 Partnership Information Return is filed. The return contains important information about the partnership including:

- Each partner’s share of the partnership’s income for the year (including capital gains),

- Each partner’s ownership % in the partnership,

- Capital cost allowance claimed;

Partners are required to report their partnership income on line 122 of their personal return. If they have a partnership loss it can be deducted on line 251 of your T1 personal return. Income from real estate sales is flowed through the partnership onto your personal return for tax purposes.

Income Splitting When Selling Real Estate in Canada:

Let’s take a look at the same example as above with John and Jane. Say John and Jane want to make their General Partnership into a Limited Partnership to reduce liability. The only problem is John doesn’t know who to make the General Partner. He doesn’t want it to be himself because he has the majority of the family’s assets. He also doesn’t want to put the risk on his wife or kids. What John can do is set up a Canadian corporation to be the general partner.

If John initially invests $100 of share capital into the corporation, this would be the corporation’s only asset on its books. John can then make the corporation the general partner owing 1% of the units in the partnership.

The corporation as the general partner bares most of the risk, but has limited liability protection and a nominal amount of assets (i.e. $100).  In this way, John has reduced his and his family’s liability. This is a fairly common practice in Canadian real estate as long as all the management of the property is carried on through the corporation.

Taxes for Corporations on Real Estate Sales in Canada

The main advantage of buying real estate through a corporation is the limited liability. A corporation and shareholders are two separate entities in the eyes of the law. If your property suffers a loss or a potential lawsuit occurs, then your personal assets will remained unharmed.

There are some negative tax implications when selling real estate through a corporation. In most cases there will be double taxation. When the corporation sells a rental property for profit it must pay capital gains tax.  Another incidence of tax occurs when the after-tax profits of the corporation are distributed to the shareholders in the form of dividend.  When the shareholders receive dividends, they pay tax personally.  There is some relief in the form of the dividend tax credit which can help individuals reduce their taxes payable.

Another major disadvantage of tax on real estate through a corporation is investment income tax is high in Canada. In Ontario a CCPC which earns investment income pays a combined federal and provincial rate of 46.17%.

Change in Use of Property

What happens when I convert my principal residence into a rental property?

In Canada every single or married couple can claim one house as their principal residence each year.

The CRA stipulates the ways you can change the use of your property:

1.) Convert all or part of your principal residence to a rental or business operation

2.) Change rental or business operation to principal residence

When either of theses scenarios occurs, the CRA deems you to have sold the portion of your property for its fair market value at the time of conversion, and to have immediately reacquired it for the same price. The portion deemed sold is the business-use portion or rental-use portion of your home.

If you generate a profit (fair market value price > adjusted cost base) from the change in use, then a taxable capital gain must be reported on your personal tax return that year.

What happens if you rent out a part of your home (principal residence)?

In most cases if you are still living in the house then the capital gain realized on the change-in-use from personal purposes to rental / business-purposes will be tax exempt due to the principal residence exemption.

Your principal residence is not considered to have changed its use (i.e. to a rental property) if:

1.) Rental or business property is small compared to personal residence part

2.) There is no structural changes to the property making it more suitable for business or rental purpose

3.) No CCA has been deducted on the business or rental part

If all of theses requirements are met then all of the residence will qualify as your principal residence even the rental or business part.

If theses conditions are not met when selling the property then you have to:

1.) Split the selling price between the rental part and principal residence part. CRA will allow a split by square metres or the number of rooms as long as the split is reasonable.

2.) Report any capital gains on the part you used for rental purposes. No gains will be reported for the principal residence portion.


Tax on Real Estate Sales in Canada

When deciding to invest in real estate, what is your investing risk tolerance?

Additionally, If you are a Canadian planning on purchasing real estate property in the United States, make sure to consult this tax guide for Canadians buying US real estate.

Also, get access to Allan Madan’s Free Report, “20 Tax Secrets on How to Beat the Tax Man,” 20-free-tax-secrets-from-allan-madan

About the Author – Allan Madan

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation.
Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

If you like this article, kindly +1 and follow Allan Madan on by clicking on these
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Tax on Real Estate Sales in Canada was last modified: November 19th, 2014 by superAmin
This entry was posted in Real estate tax and tagged , , , , . Bookmark the permalink.

About the author

is a Chartered Accountant, CPA and Tax Expert and enjoys working with business owners, individuals and entrepreneurs.


The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

233 Responses to Tax on Real Estate Sales in Canada

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      Thanks !

      The Team at Madan CA

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  6. Robert Fox says:

    You explained the situation about capital gains tax on the sale of investment properties in Canada very well. I have another question for you that you didn’t address.
    I purchased the investment property (house) 2 years ago for $200,000. I sold it today for $210,000 with the help of a realtor. The realestate fee is $8500 + the lawyer fee of $1000. I improved the value of the property by replacing an outside wall with new siding and insulation for $600. I think this all adds up to more than what I got for the sale of the house. I think I am in the hole so does the government (taxman) pay me money? Can I claim my loss? If not, this isn’t fair.
    Rob at …

    • superAmin says:

      Hi Robert,

      Thanks for your inquiry!

      Your initial adjusted cost base of your property was $200,000 and later increased by $600 because of the insulation improvements. As such for the purposes of the property dispositions, your new ACB is $200,600. Now, in terms of your disposition proceeds, it will be your initial selling price of $210,000 less any outlays and expenses, in your case the real estate and lawyer fees ($8,500 + $1,000 = $9,500).

      The bottom line is that you will have a capital loss of $100. The government will not be paying you this amount. What will happen is that this capital loss will be applied to your net capital gains for the year (if you have any). If you don’t, you can carry it back 3 years and apply it to any previous capital gains then or carry it forward for an indefinite period of time. Your capital loss carryforward amount will also be stated on your Notice of Assessment from the CRA once you file your tax return for that year.

  7. May says:


    We purchased a pre-construction 1 bdrm condo 2 years ago, but recently bought a 2 bdrm condo because we needed more space. The 1 bdrm condo is near completion and will be closing in a few months. But I am required to pay an occupancy fee until the closing date. If we decide to sell the condo instead of renting it, can I claim this occupancy fee as part of the costs to be deducted from the net sales to calculate the net profit?


  8. Mrs.Hall says:

    I Googled “capital gains on commercial property sale” and yours was the most informative and in layman language. Still unclear about a few things but I will re-read it several times and ask our accountant, thanks for the help.

  9. Sherlynn says:

    I am a joint owner of a small condo with my mother. The condo is my residence home in Singapore. I am now married to a Canadian and have now moved to Canada (Montreal) for about 2 years. Recently, we sold the condo and I will get the proceeds of about S$300,000. Out of this amount, $100,000 will be returned to Government Central Provident Fund (money borrowed from CPF for purchase of the condo). Thus, the net cash gain is S$200,000. Do I need to pay Capital Gain Tax on this amount as this property was bought and sold in Singapore.

    If I keep this money in a joint account with my mother in Singapore, do I need to pay capital tax on it.

    Although I am joint owner of the property but my mother paid 2/3 of it. Therefore, we have agreed that she will take a higher portion of the sale proceeds. So for capital gain, how do I declare the amount received?

    Thank you

    • superAmin says:

      Dear Sherlynn,

      The gain you will have to realize in Canada is as follows: 1/3 of ($300,000 – value of the property on the date of entry to Canada). This amount will have to be included in your Canadian tax return.

      If you have any more questions, please do not hesitate to contact me.

      - Allan

  10. Dianne says:

    Your site is very informative THANK YOU! Can the 50% capital gain on the sale of a property be split between spouses? Ex. We have a capital gain of 200,000$; 100,000$ is taxable; we each claim 50,000$

    • superAmin says:

      Hi Dianne,

      You can split between spouses if you two are the joint owners of the property as per the purchase/legal documents.

      Usually, the gain is split between spouses based on the % of their contribution when they purchase the property. For example, if you paid $150,000 and your spouse paid $50,000 for a $200,000 property initially, then you would recognize 3/4 of the gain and your spouse, 1/4 of the gain when you sell the property.

      Thank you,

      - Allan and his team

  11. Cliff G says:


    i had a question here … i am wanting to sell the house im in , its really owned by my Mother and father since the title is in there names , and it was given to them many many years ago when my grandmother died.
    Ive been living in the house myself for 5 to 6 years now and was wanting to move out of Toronto and live up north.
    the House was bought 30 years ago or so for $125K … the selling price today would be around $450K … would my parents have to pay the capital gains on the house if i sold it? or is there a way to get around it?

    thx so much.

    • superAmin says:

      Hi Cliff,

      It depends on several factors.

      If during the period of time that the house was owned by your mother and father, your parents lived in the house at any time during the year (let’s say, they lived in the house every summer), then they can deem the house as their principal residence and pay $0 in taxes when the house is sold.

      However, they must have not claimed any other residence as their principal residence and sold it during the period mentioned above.

      - Allan and his team

  12. angela says:

    I have a question and hoping it can be answered by you.
    I bought a house but it is under my parents names because I had no income at the time but the down and all other expenses were paid by me. My husband and I live in this house while my parents live at their own house. Now I want to sell it. We bought is for $205k and we are selling it for $335k. Capital gain would then be $130k or $65k? We did change the furnance and roof and renovated worth $30k, can we deduct these expenses and can I also deduct the lawyers and agent commission?
    Please help and thank you.

    • superAmin says:

      Hi Angela,

      Although you paid all the expenses, since the house is under your parents’ name, the gain will be included on your parents’ tax return. However, your parents may be able to offset a portion of the capital gain using the principal residence exemption.

      The roof and furnace renovation will help reduce the capital gain and the expenses such as legal, commission, and land transfer tax will also be able to reduce the capital gain.

      Thank you,

      - Allan and his team

  13. Daniel says:


    This is some great info, thank you! 2 additional questions:

    1.) Is the borrowing cost (interest on mortgage or line of credit pertaining to investment property) deductible for capital gains?

    2.) In relation to May’s question (posted on Jan 24th) about occupancy fee.

    i.) If one does decide to rent out the property (during occupancy prior to closing), would it make more sense to offset your rental income by the occupancy fee, as rental income is 100% taxable?

    ii.) Post closing: Are condo fees and utility charges deductible from capital gains if the condo was NOT rented out?

    • superAmin says:

      Hi Daniel,

      Thank you for your question.

      1) No it is not. However, if you plan on renting out the property, then the interest can be used to offset your rent income

      2) You can reduce your capital gains by the occupancy fee

      3) You would not be able to claim full amount of occupancy fee as rental expense. Rather, the cost would be added to the cost of the property and you’ll be able to claim 4% depreciation expense on the building to offset your rental income.

      4) No but you can claim it as rental expense.

      Thank you!

      - Allan and his team

  14. Kevin Campbell says:

    I have a recreational Property in Alberta that I have held about 13 years. I now wish to sell it but obviously would like to reduce the amount of capital gains I pay. Are the property tax or utilities deductible?
    Thanks Kevin

    • superAmin says:

      Hi Kevin,

      Property taxes or utilities are not deductible from your capital gains.

      However, you will be able to reduce your capital gains by the following:

      - Any significant improvements made to the property (ie. added patio)
      - Land transfer tax
      - Legal cost incurred at time of purchase and sale
      - Commission fee
      - other

      Furthermore, you may benefit from claiming principal residence exemption on the property.

      If you need further assistance, please do not hesitate to contact us.

      - Allan and his team

  15. Roger Yap says:

    Hi, found your article to be very informative.

    For my situation, my mom and I bought a condo back in 2005 for 170k. I lived there alone for 3 years. Once I got married, my wife and I purchased a townhouse and rented out the condo. Fast forward to 2012, we sold the condo for 240k (less realtor and lawyers fees). I have the following questions:
    1) Since the condo was my principal residence between 2005-2008, can I base my capital gains on the value of the property starting 2008 instead of 2005?
    2) If yr 2008 is is allowed above, what can I use as the basis for property valuation i.e. MPAC statement or realtor sales values or other?

    Thanks in advance.

  16. Rose says:

    I just bought my 2nd home for $500,000.00 and we are putting in $40,000.00 dollars into renovations. We are hoping to sell it this year for $630,000.00. I just paid $8500.00 to land transfer tax and lawyer fees on top of all the renos. At the end of all this how much will I be taxed. I was told by another source that we have a certain exemption per year per lifetime….is that only if you have a business or shares????

    Thanking you in advance.

    • superAmin says:

      Hi Rose,

      Each individual (if single) can designate one property as a principal residence. You are allowed to designate only one property as principal residence per tax year. So only one of your 2 properties can be designated as principal residence during any year of ownership. If you are going to sell your 2nd home and hold on to your first home, we suggest that you designate your 2nd home as principal residence for every year since your purchased the property. This will allow you to be exempt from any capital gains on the property due to asset appreciation. This is not a lifetime exemption but your 1st home will not be allowed to be designated as principal residence for the years that your 2nd home was designated as principal residence. This means that you will likely incur some capital gains on the sale of your first property.

      - Allan and his team.

  17. Sam says:

    Hello Allan and the team!
    I have a question regarding a sale of rental property: for capital gain calculation, can i add CMHC insurance to adjusted cost base and can i include mortgage penalties and fees (for breaking the mortgage agreement) to outlays and expenses?
    Thank you very much

    • superAmin says:

      Hi Sam,

      CMHC insurance is added to adjusted cost base on disposition of rental property.

      Yes, you can include mortgage discharge fees and mortgage prepayment penalty as part of your selling costs.

      - Allan and his team.

  18. Franky M says:

    Hi Allan,

    I have purchased a new build that comes without appliances. I want to buy new appliances and install some pot lights & window treatments prior to selling. Can these purchases be included as cost? Also, can the interest on short term mortgage be expensed as well ?

    Thanks for your help !

    • superAmin says:

      Hi Franky,

      Thank you for your question. Yes, the cost of appliances and improvements can be added as cost of the property when selling in order to reduce your gain on sale for tax purposes.

      For mortgage interests, you’ll only be able to deduct it if you were renting out your property during that period.


      - Allan and his team

  19. Frank says:

    Hi Allan,

    I’ve owned a house for 7 years. Half of it was rented. I lived in the other half. My accountant deducted 4% CCA of 50% of my house value every year. Now I’m selling the house. Purchased at 125k. Selling at 145k. I also own a business. I’ve used 15% of the house as my main office. I’ve deducted 15% of house expenses as office expenses. Will I owe income tax or HST to government on this sale?

    Thank you very much!

    • superAmin says:

      Dear Frank,

      Thank you for your question. You will indeed owe income tax on the rental portion of your house. The HST will not apply on the sale of the house.


      Allan and his team.

  20. James says:

    Great article currently selling some real estate and this will definitely help save me some taxes

  21. Daniella says:

    I purchased a home 4 years ago on my own, and lived in it for a short period of time. I then got married and myhusband purchased a home on his own (my name is not on the house at all). In the interim, I’ve rented out my original property and moved into his home. I am looking to sell it – will I pay capital gains on it, since the home I am currently living in is not mine, I do not own it, the house is in his name solely?

    • superAmin says:

      Hi Daniella,

      You may be able to claim capital gains exemption on most if not all of the sale. According to the principle residence exemption from the time you got married, you and your husband can designate only one home as your principle residence. Your original home will be your principle residence up until you got married. I would designate the home you intend to sell as your principle residence after marriage because this will allow you to be exempt from capital gains taxes.

      However CRA states that you must at least maintain and occasionally live in that house. The problem for you Daniella is you have rented out the property. Therefore from the time you have rented it out, you will have to pay capital gains on that portion only. If you have rented less than a year you will not pay capital gains under the principle residence exemption. To learn more about this exemption visit:


      Team at Allan Madan

  22. Jill says:

    I’m about to buy my first house and was wondering if there are any tax breaks that I may be able to take advantage of? Thanks

    • superAmin says:

      Hi Jill,

      Yes there is a deduction available if it is your first home purchase. If the home is being purchased in Canada and you have not purchased a home in the previous 4 years you are entitled to a $750 deduction on your tax return. Look for the First time home owner deduction on your T1.


      Team Allan

      • Supatra says:


        I scanned through T1 for the First time home owner deduction as per your reply above but unable to find it in T1.
        Could you pls tell me what line number ?
        thank you kindly

        • amadan says:

          My name is Matthew and I am a Tax accountant here at Madan Chartered Accountant. Allan has asked me to reply to your question on where you can find the first time home buyer credit on your T1 personal tax return. This credit can be found on Line 369. If you are found eligible you will receive a credit of $5,000 on your return. You can click on the following link for more information on this credit

  23. Jasmine says:


    Just wondering I am self employed and have one rental property I own. What forms will I be required to file this upcoming tax season.

    • superAmin says:

      Hi Jasmine,

      Since you are considered a sole proprietor in the eyes of the government you will only be required to fill out your rental income on line 126 and 160 on your T1 General and attach form T776. This form is just a calculation of your rental income for the year.



  24. Brenda says:

    This is a very informative site and I thank you for using layman’s terms :) I do have a question though. I purchased a house about 9 years ago and lived in it for between 6 and 7 years. My common-law spouse moved in with me and we lived there together for the last 2 of those 6-7 years. He found work elsewhere and we have moved almost 1000 kms. away and have tried unsuccessfully to sell the house. It has been rented out in the meantime, and we have been renting a house in the city we moved to because we had hoped to sell ours before buying another one here. Our patience has run out though and we are now in the process of purchasing a second house where we have lived for the past 2 and a half years. So, will this mean that we have to pay capital gains on the first house when we are finally able to sell it?
    Thanks again for the info :)

    • superAmin says:

      Hi Brenda,

      Thanks for contacting me. When a principal residence is converted into a rental property there is a deemed sale on the date of the conversion. This means that the principal residence is deemed to be sold at its fair market value (as of the conversion date) and reacquired for the same amount (which becomes the new cost or ACB). The principal residence exemption is claimed to exempt the capital gain realized on the conversion from tax.

      Furthermore, when you sell the rental property the capital gain on the actual sale is calculated as the difference between the selling price (less selling costs) and the ACB.

      For example, assume that you purchased your first house for $300,000. Further assume that the first house was worth $450,000 when it was converted from a principal residence to a rental property. As a result, a capital gain of $150,000 is realized. However, the principal residence exemption can be applied to exempt the $150,000 of capital gain from tax. Also, the new ‘cost’ of the first home now becomes $450,000.

      Should you sell the first home for more than it’s ‘new cost’, which is $450,000 in the example above, the excess over the new cost will be treated as a taxable capital gain.


      Allan Madan, CPA, CA & Team

      • Brenda says:

        Wow Allan, that is so helpful, and it should work out in our favor…….except that I’m not sure how we show all of this. What I mean is, we had a rough idea what our house was worth when we moved but did not have an appraisal or anything to show that. It was just a number we came to from our own research on the housing market in that place at that time and the number the real estate agent felt was a good place to start. What kind of documentation will the tax man need from us to support the numbers we use?

        • superAmin says:

          Hi Brenda,

          The CRA will require an appraisal report. This report can be prepared by your real estate agent. The report should make reference to the values of at least three properties comparable (in size, location, condition) to your property.


          Allan Madan, CPA, CA & Team

  25. Jim says:

    Hi There,

    I am expecting to purchase real estate property’s in Florida. I was trying to establish a partnership so that i could potential income split the profits with my wife. After doing some research I found that I can either set-up a Limited Liability Partnership(LLP) or a Limited limited Liability Partnership (LLLP). Is this a typo? or what is the difference between the two?

    • superAmin says:

      Hi Jim,

      This is not a typo in the United States there are LLP and LLLP structures. In an LLP (limited liability partnership), the partners assume the management roles in the entity but each partner is not liable for another partner’s actions. In an LLLP (limited liability limited partnership), a general partner is not liable for another general partner’s actions and the management roles are assumed by only the general partners, not the limited partners.



  26. Roxanne says:

    Hi Allan,

    I am in a predicament here, me and my husband have dual citizenship between Canada and the US. We currently live in Canada but are planning on living in Florida for a year till March 2015. We plan on renting out our home in Canada till we return. Can you please enlighten me on the tax implications for our home in Canada?


    • superAmin says:

      Before you leave it is important that you convert your principal residence to a rental property. When you return to your Canadian home, you won’t have to worry about a capital gain tax liability as long as you make the proper election to change use before you leave(2014). When you return in 2014 you can convert your income property back to your principal residence in 2015. By doing this no CCA would be claimed during the years you are in the states. When converting your Principal residence to a rental property the CRA designates a sale of the property at FMV and any profit made on this sale is a taxable capital gain on your income. When you return your are said to have reacquired the property at FMV and any gain on the house would also be considered a taxable capital gain.



  27. Alfa liou says:

    Hi Allan,
    I have questions about to sell my commercial property.
    1, about land transfer tax and legal fees, when I add these fees to my property value, can I still make these fees as my expenses?
    2. About capital gain, when I sell this property, if I have capital gain, can I deduct from the company loses in the past years? And how many previous years of loses I can use?
    Alfa liou

    • superAmin says:

      Hi Alfa,

      Thanks for your question. My responses to your questions are:

      1. Land transfer tax and legal fees paid to buy an investment property should be added to the cost of the property. If they were incorrectly classified as an expense in a previous year, then the incorrect tax return should be amended.

      2. Business losses can be carried-forward for up to 20 years. Capital losses can be carried forward indefinitely. Both businesses losses and capital losses can be used to offset capital gains realized in the year.

      Please feel free to ask additional questions relating to real estate taxes in Canada.

      Allan Madan, CPA, CA

  28. Timothy says:

    Hi Allan,

    I was filing my income tax through turbo tax and cam across a Ontario Energy and Property Tax Credit. I was wondering what is this credit? and can I claim it?


    • superAmin says:

      Hi Timothy,

      The Ontario Energy and Property Tax Credit is designed to help low- to moderate-income individuals 18 years of age and older, with sales tax attributed to energy and property taxes they may pay.If you pay rent or property tax, you may receive a credit up to $963. For more info on eligibility please check out Finance Canada’s bulletin on the credit.



  29. Lindsay says:

    Hi Allan,

    I took advantage of the home buyer’s plan in 2012 and withdrew some of my RRSPs towards a down payment on my first home. My question for you is when must I start paying back the amount that was withdrawn?

    • superAmin says:

      Hi Lindsay,

      You will have to start repayment during the second year after you made your withdrawals.You can take up to 15 years to repay the amount withdrawn from your RRSPs under the Home buyer plan. You can also repay the full amount into your RRSPs at any time.



  30. Mike says:

    Hi Allan, I owned 1/3 of my mother’s principal residence, she owns 1/3 and my sister owns the other third. She wants her money now!, if I buy out her third does this trigger a tax event for her or me? What do I need to do to demonstrate that the Price paid for her third is “fair”, should standard commission and fees be reduced off some appraised value (appraised values are at best guesstimates?)

    • superAmin says:

      Hi Mike,

      If your mother lived in the home for the entire period that she owned it, she can claim the principal residence exemption on her 1/3 share, which will exempt any gain from tax. You should have the property appraised to determine a fair price for buying her share in the property. Commission fees should not affect the appraised value.


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  31. Duane says:

    Hi Allen. I plan to housesit for a year and rent out my primary residence during my absence. What are the tax consequences?
    Also, if I decided to do this for a 4 yr. stretch and the home required impovements during that time, could I claim the improvement ie) furnace or hot water tank as an expense to offset rental income. Can I deduct cost of yard maintenanc from rental income while I am away? Thanks, Duane

    • superAmin says:

      Hi Duane,

      Thanks for contacting me. If you convert your principal residence into a rental property, there will be a deemed disposition on the date of the conversion at the fair market value of the principal residence at that time. If you lived in your home for all of the years that you owned it, then the taxable capital gain will be reduced entirely by the principal residence exemption.

      During the rental years, you must file form T776, Statement of Real Estate Rentals, with your T1 return annually, and report both rental income and expenses. Repairs for the general upkeep of the property can be deducted from rental income. However, improvements (which increase the life of the property, make it better, and last more than 1 year) are capitalized to the cost of the property.

      When you move back into the property, or sell it, there will be capital gains tax on the increase in the value of the home from the date of conversion (see above) to the date of sale. Improvements made will decrease the taxable capital gain. Note: If you move back in your home within 4 taxation years of renting it, you could claim a special election to treat your home as your primary residence for the 4 years you weren’t living there. This will reduce or entirely eliminate any capital gains tax.


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  32. Stacy says:

    I own a house, I bought the house across the street in 2013 for a rental property. The reno process was extreme and the whole house had to be gutted and everything replaced. I incurred a lot of expenses in 2013 for the makeover. Ive decided that the house is too nice for renters to destroy so I figure I will sell in 2014 when I complete the renos. Do I claim my 2013 expenses on my 2013 tax return, and than the rest of the expenses that I incur in 2014, after I sell? Or keep all of the expenses until I sell and report everything in 2014? Thanks

    • superAmin says:

      Hi Stacy,

      Since you made extensive renovations soon after you purchased the home, and shortly thereafter are in the process of selling it, the profit realized on the sale will be treated as business income. Business income, unlike capital gains, is fully taxable to you.

      The renovations made will be added to the cost of the property and the profit should be reported in the year of sale. Do not claim the renovations as ‘expenses’ on your 2013 return. If you made substantial renovations to the home, you will be required to self assess HST and remit the HST to the Canada Revenue Agency. For further details, please email me at


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  33. Shahin says:

    I and my wife had real state capital gains on a property which it was under my name. We also had capital loss on another property which was under her name however I had paid all the price. Can I claim this loss against my gains. CRA says I can not.
    Much thanks.

    • amadan says:

      Hi Shahin,

      Generally speaking, you cannot offset your wife’s losses against your gains. In the future, consider transferring property that has accrued losses to the spouse that owns profitable property with accrued gains. The property can be transferred between spouses at its ‘cost’ amount. After the transfer is made, the spouse can sell the money losing and profitable properties, and offset the resulting losses against the gains.

      In your case, it sounds like my advice is too late.


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  34. Thomas George says:

    Hello Allan,
    Thank you for your YouTube video on real estate. I recently watched it, and I found it to be extremely informative. I am a somewhat new Realtor and I have a question I was hoping you could help me with. As real estate agent, I have to take a total of 7 courses. There are three I must take to begin selling, and three I must take in order to become a fully licensed agent. Finally, there is one more course if I wish to become a broker. I was wondering whether these educational expenses count as tuition credits, or possible an education expense on my self-employed schedule. Any insight would be greatly appreciated!

    • amadan says:

      Thomas, thank you for your question. Officially, the CRA’s position is that fees paid towards obtaining a degree or professional certification are a non-deductible. However, if you are enrolled at an eligible institution you can claim the tuition tax credit. Regards, Allan Madan and Team

  35. laura says:

    I wonder if you could help me. I purchased a rental property for $300,000 and had a mortgage of $250,000. I am thinking of selling the property. My question for capital gains, can I deduct the remaining mortgage as an expense?
    eg. if I so if I sold the property for $350,000 could I deduct the remaining mortgage say of $200,000 before calculating the capital gains? As does the capital cost allowance get added to the capital gains? thank you.

    • amadan says:

      Hi Laura,

      Thanks for your question. Paying off the mortgage from the sales proceeds does not reduce your capital gain. The capital gain is computed as the difference between the selling price (less closing costs) and the amount you paid to buy the property.


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  36. Malcolm Duarte says:

    Hello Allan,

    My dad lives in Brazil, but he is thinking of gifting a property to me. I am a Canadian resident. Does he have an obligation to apply for a clearance certificate? Or, does he figure out the fair market value of the property and file his return later? If he ends up not paying any tax on the property, would I as the recipient have potential tax liabilities?

    • amadan says:


      At the time the gift is given, the CRA will deem the non-resident to have gifted the property at its fair market value. At this time, section 116 of the Tax act will apply. The section states that the person receiving the property has to hold 25% its fair market value unless the non-resident provides a clearance certificate.

      The clearance certificate can be obtained from the CRA.

      Allan Madan and Team

  37. Howard Archibald says:

    Hi Allan.
    Lots of good information, thanks. My wife and I are considering selling a rental property that we have owned jointly for the past 17 yrs. We are considering carrying the mortgage as well. Would we have to pay all the capital gain up front or can we pay it yearly as we receive our payments. I realize that we have to pay tax on the interest that we receive but was wondering if it is possible to pay capital gain each year on the portion of the principle that is a capital gain.

    • superAmin says:

      Hi Howard,

      Thanks for contacting me. You can claim a capital gain reserve to defer paying capital gains tax for up to 5 years, where you do not receive the entire proceeds in full from the buyer upon the closing date. As payments are made (excluding interest), you must include a capital gain in your income for the year. The amount to include is calculated as: cash received in the year / mortgage receivable x Capital Gain.


      Allan Madan, CPA, CA
      Tel: 905-268-0150

  38. Daniel Noir says:


    My wife and I formed a numbered company with my parents. We bought a holding property a few years back, for $800,000. This summer, we sold it for $1,600, 000. We reinvested it in a 1/3 share of a franchise hotel being built. Can we re-invest the capital gains and principal into a new entity without being taxed? If not, what is the best route to avoid the most amount of tax?

    My wife and I also sold our principal residence for $116,000 profit. It is a personal property, and not part of our business. Therefore, we are looking at around $516,000 in capital gains taxes this year.

    • superAmin says:


      In your situation, it would be the company that is liable for capital gains tax. There is no provision for rollover in Canada, unless the property is taken for the public good. Your personal property would not be taxable, as you have described it. The only easy method of negating the tax for your gains within the company would be to buy flow through shares, or a mutual fund of flow through shares.

      Allan Madan and Team

  39. Bala Oliver says:


    Four years ago, I bought a limited partnership land investment through Walton International. Originally, it was worth around $20,000. It is now ready to be cashed in at around $55,000 for a profit of $35,000. I paid for it outright when I bought it. Is there anything I can do to limit the amount of capital gains tax I pay?

    • superAmin says:

      Hello Bala.

      First of all, I would determine the amount of capital gains you are liable for. If you received any income in the time between buying and selling the property, the capital gain may be more than you think. I would examine your T5013, T3, or other information slips you receive. Look to see if there is a Box 42 or other notation amount showing “return of capital”. If there is, the “return of capital amounts” has to be deducted from the $20,000 you paid. This would increase your capital gain.

      After that, one-half of the gain is taxable on line 127 of your return. A simple way to avoid this is to buy an RRSP for that amount, given that you have any room left. To determine this, look at the bottom of last year’s Income Tax Notice of Assessment or call the Canada Revenue Agency TIPS at 1-800-267-6999. The RRSP Deduction Limit service is available from the middle of September to April 30.

      Allan Madan and Team

  40. MannyP44 says:

    Is there a complete list of what constitutes as a “capital expenditures” somewhere? I’ve had a few properties that I’ve been renting out for years that were in good condition, but recently sold them. I’ve never had issues with tenants but I’m looking at new properties to buy now and the seller has let it be known that the properties need improvements as per the tenants’ request. I really don’t mind making those improvements but would like to know where to start, and a list would be quite helpful.

  41. Maya Kreindel says:

    Hi Allan.

    We are planning to move into our rental property, which we have owned and rented for approximately seven years. We would like to build a new home. How long you have to live in your rental property to avoid paying capital gains?

    • superAmin says:

      Hello Maya.

      Moving into the rental property will trigger a deemed disposition and thus taxable capital gains. Officially, this is known as a “change of use”. Assuming you rented it out immediately after purchase, the gain would be the difference between the ACB (adjust cost base) and the value when you move into it. Assuming that the value of the property increased, you cannot avoid capital gains from the period you rented out the property.

      Allan Madan and Team

  42. Myghal Jago says:


    I bought a duplex in May of this year. The apartment portion of the property hadn’t been upgraded in 20 years, so I updated it with a new kitchen and floors. It originally had hardwood floors that were very worn out and rotten, so I updated them. I also put in new appliances, and am thinking of putting in a new toilet. Do these count as a current or capital expenses?

    • superAmin says:

      Hello Myghal,

      You are on the right track. Repairs or maintenance that are integral to the property can be considered current expenses. Therefore, your replacement of the hardwood would be an expense if it is restoring it to its original condition. Anything not integral to the property, such as a new appliance, is a capital expense. The new toilet would most likely be a capital expense. A material improvement of property beyond its original condition is a capital expense. Your addition of the toilet would be a capital expense.

      Based on your information, I believe most of your renovation is a capital expense. If you are going to deduct the flooring, be sure to show that they were falling apart and you are replacing them in the name of safety.

      Allan Madan and Team

  43. Janina Nadja Achilles says:


    I recently bought a property with a group. I plan on building a cabin on it for myself. I will not be renting it out. When my share of the property is eventually disposed of, I know that I will have to pay capital gains. I have the cost of initial purchase. What additional costs and expenses can be recorded to increase my adjusted cost base? Is there anything that cannot be added?

    • superAmin says:

      Hi Janina.

      Only the building of the cabin and certain upgrades thereafter can add up to the adjusted cost base. Maintenance is not included. Things like property taxes and utilities would be considering operating costs. These could be offset if there was rental income with the prospect of making a profit, but not in this case.

      Allan Madan and Team

  44. Gina says:


    My mother is remarrying, and will be moving in with her new husband. She has decide to give my sister her old house, which is valued at $80,000. My mother purchased it for $73,000 about three years ago. My sister is going to be living in the house as her primary residence. What are the tax implications in this situation? What is my sisters cost base?

    • superAmin says:

      Hello Gina,

      If it was her principal residence, there should be no tax implications for your mother. This is because she can use the principal residence exemption on any property gains. You sister’s adjusted cost base will be the fair market value at date of transfer. All of the regular costs and taxes that would happen during a regular sale will apply here (i.e. agent fees).

      Allan Madan and Team

  45. Francine says:


    I have a cottage that I rented for a year. I am thinking of selling my home, and moving into the cottage permanently. Regarding capital gains, how long do I have to live there before I can sell the cottage without capital gains?

    • superAmin says:


      You won’t be able be to claim the principal residence exemption for the years you did not live in the cottage. You can only claim it for the years you lived in the cottage as your primary residence.

      If you convert the cottage from a rental property to a personal one, there will be a deemed sale of the property for tax purposes. The “sale amount” will be equal to the fair market value of the cottage at the time of conversion. This could result in a capital gains tax.

      Allan Madan and Team

  46. Bianca says:


    I am aware that if a rental property becomes a primary residence, there is a deemed sale on the conversion that may result in capital gains. I only own one property, but do not live in it. I am a renter myself, living in another town. Would I have to pay capital gains in this instance, considering I do not own my current residence?

    • superAmin says:

      Hello Bianca,

      If you have never lived in the property, but are thinking of doing so, you need to determine the “fair market value” of the property. In your instance, you want a value as low as possible. Be sure to get the house completely appraised and inspected before you convert it. You may also want to hire a real estate agent to give you the market conditions.

      To determine if there is a capital gain, take the current fair market value and subtract it from the price you bought the house for. If you bought it for 160K, and it’s value is 190K, then your capital gain is 30K. From this gain, you get to subtract an costs you incurred. This includes legal bills, land transfer taxes, appraisals, and capital improvements to the property that were not previously expensed. This portion is known as your adjusted cost base. If this totalled 15K, then your capital gains would be 15K (30K gains – 15K of costs). Your resulting tax would be half that (7.5) times whatever the tax rate is for your income level.

      Allan Madan and Team

  47. Stephanos Georgios Kokinos says:


    I have bought and rented out a condominium unit as an investment. Now, I am thinking of selling it. Can I claim the condo’s tax assessment bill as an expense against the capital gains? I have also sold some shares that have dropped in value, can I use those to offset capital gains?

    • superAmin says:


      Unfortunately, you cannot claim the tax assessment bill against a a capital gain. You can only claim deductions against business income, or expenses against annual rental income. If you want to reduce your capital gain, you need a capital loss. Fortunately, those stocks that dropped in value do count as a capital loss – use those to offset your capital gain from selling the condominium.

      Allan Madan and Team

  48. Hendrik Wolfgang Hermann says:


    I own a duplex, and live in one part of it and rent the other. I understand that I can’t claim CCA on the house and continue to have the capital gains exemption. However, I bought a new kitchen and performed various other upgrades. Could I claim CCA on that and not lose the capital gains exemption?

    • superAmin says:

      Hello Hendrik.

      If you own a duplex, only part of it is eligible for the principal resident exemption. The rental part of it is subject to capital gains. When it comes to selling, you split the selling price and the adjusted cost base between the part you lived in and the part for rental. You can do this by square meters or the number of rooms, as long as the split is reasonable. Report only the gain on the part used to produce income.

      Upgrades like a new kitchen have to be claimed via the CCA process. These shouldn’t affect the capital gains, unless you sell the rental. If you claim CCA on the property structure itself, you will face CCA “recapture” when it comes time to sell. I would not recommend claiming CCA on the whole property.

      Allan Madan and Team

  49. Rong Xun Kwok says:

    My uncle recently passed. Through his next of kin, I found out he left me his cottage in Northern Ontario. As a student, I am new to financial management. What tax implications will this have on me? Am I responsible for paying taxes on the property, even though my uncle gave me it as an inheritance?

    • superAmin says:


      When someone dies, the CRA considers the property to have accumulated all necessary gains and losses. They will also consider the property sold right before the person’s death, at the fair market value. They call this a “deemed disposition”. Anyone who receives the property will also have obtained it at the same fair market value.

      Having said that, you do not pay taxes on the property when it is transferred to you. Your uncle’s estate will pay the taxes, and you will be responsible for the property afterwards. Unless you make it your primary residence, you will likely face capital gains taxes. Therefore, you should find out the property’s fair market value to get a clear picture of the gains you will face.

      Allan Madan

  50. Mark says:

    I have a unique situation that I was hoping you could help me with. I own a home and have one commercial property that I am planning to sell. But I recently inherited a 3rd property when my sole parent passed away. Would I still have to pay capital gains on this 3rd property?

    • superAmin says:

      If you choose to sell the third house that you received, you would need to pay a capital gains tax on the property. As such, you would be paying capital gains tax on both properties. Depending on when your parents put your name on the title of the house, you may only have to pay a small amount in capital gains tax on this third property. This is because capital gains taxes are only calculated from the point of inheritance to the point of disposition. So if your name was put on the title of the house years ago, then you will be paying more in the capital gains tax. You can lessen this amount by selling the third property more quickly.

  51. Norm Kevilovski says:

    Our corporation bought a vacant land, its only asset, for investment purposes. How are the realty taxes treated for tax purposes?
    Are they capitalized and added to the ACB, and if so do I have to file a Balance Sheet with the zero return?


    • amadan says:

      Hi Norm,

      In short no you cannot deduct interested on borrowed money you used to pay for child care expenses. Interest can only be deducted if the its purpose was to earn income.


  52. Ali Al Ali says:

    Hello Allan,

    I am a dual citizen of Canada and the United States. In 2013, I sold a Canadian property. I deposited the proceeds of the sale into a Canadian bank account. The property was never rented, and there was no capital gains arising from the sale. Is it a requirement to record the sale while filing my 1040, or anything relating to the funds from the sale?

    • superAmin says:


      First of all, make sure you are properly calculating gains/losses on the property. You would take the profits in 2013 US dollars vs. the fair market value at the time you sold the property. Where money is earned, kept, or deposited, it should all be reported on 1040. If you took a capital loss on the property, you should report it so you can use it for future gains. Report the sale on the 1040 in order to prove the transaction produced no taxable income. Although they may communicate, filing something with the CRA does not satisfy any IRS requirement.

      You must still report the proceeds of any sale, barring IRS exemption.

      Allan Madan and Team

  53. Cameron says:


    I am thinking of selling one of my condominiums to reinvest in another property, for $120,000. As I took amortization to reduce my taxes, my accountant tells me that I would have over 25K in capital gains. My real estate agent tells me that I can avoid this by reinvesting in another property in the calendar year. Who is right?

    • superAmin says:


      I believe you are mixing two different concepts. One is the recapture of CCA claimed on a building, and capital gains. Let us say that you own a property and you have taken a capital cost allowance against the property during your period of ownership. When you sell the property for an amount equal to or more than its original purchase amount, you are required to report the CCA claimed to date as income on your tax return (aka ‘recapture’).

      You can offset the recapture of CCA by acquiring identical assets in that CCA class, which offsets the recapture on the original property. This is a totally separate matter from capital gains.

      Allan Madan and Team

  54. Samuel Smith says:


    My father inherited two pieces of land that adjacent to his primary residence. Essentially, they are now part of his primary residence. They are assessed at $15,000 together, and are selling for the mid 40’s together. Will my father be charged capital gains? If so, how does he calculate it?

    • superAmin says:


      This depends on a number of factors. One of them is whether the land is more than half a hectare. If yes, then the excess usually cannot be excluded through the principal residence exemption (See the CRA folio:

      If it is less, there is still consideration of whether the two parcels of land can be considered the same property as the principal residence. Just because they are adjacent does not necessarily make it true. You may have to look into rezoning and legal property definitions may be required to legally make it one property.

      If the properties do qualify for the principal residence exemption, no reporting is required. Do not assume that the CRA will not know about the sale of the property. There have been cases where the CRA has come back several years later with large tax payments due. If they do not qualify, your father will need to report the gains on his tax return. It would be reported on schedule 3 of the tax return in the year he sold the property. Unless tax elections were made, the cost of the property will likely be at fair market value.

      Allan Madan and Team

  55. Samuel Morissey says:

    I have a rental property that gives me a net return of just over $600/month. My ROI is basically 100%, because I refinanced a year after purchasing it and recuperated my down payment. If I were to sell it, I would profit about $120k today. Should I stick with the rental, or sell and invest my profits?

    • superAmin says:


      If you property is fully financed, then your ROI is technically infinite. None of your money has been invested. ROI is return on investment, so you take profits/invested amount ($600/0). If you sell, you will need to claim the capital gains, so you will have closer to $90,000 to invest. Also, about half of your mortgage payments are going towards principle.
      As rents generally keep up with inflation, I would suggest keeping your rental.

      Allan Madan and Team

  56. Jaromir Tobiasz Tang says:


    My wife and I purchased a second house several years ago. We bought it for the purpose of selling it later, hopefully earning a profit. We did not rent it out. When I bought it, I was not aware of the requirement to pay capital gains upon selling the property. Do I need to pay capital gains, and if so, how much?

    • superAmin says:


      You will have to pay tax if you sell a house that is not your primary residence. The capital gain will be equal to the amount you sell it for, minus the amount you paid for and expenses. You will then end up paying income tax on half of the capital gains. This PDF from the CRA may also help:

      Allan Madan and Team

  57. Jill Salmon says:


    I am a 22 year old recent graduate of the University of Toronto. I make 40k consulting for a small IT company in Ontario. I have no savings, and 15k in student loans that I am paying back aggressively. I will be putting away $100 a month into a savings account for emergencies.

    I have begun looking for apartments, and I have noticed that many landlords own more than one property. They, in turn, rent out rooms to students every year. Where I am currently, the apartments go from $400-$750 a month. They are 3 to 4 bedrooms. There are a lot of universities/colleges in the area, so there is quite a demand. Should I buy myself a house and live in one of the rooms? How does this work? If I did, it would be after paying off OSAP.

    • superAmin says:


      The housing market isn’t in a great place to do this right now. Without a down payment, you cannot really start doing this. You can get a down payment for one house with a 30 year mortgage, use the rent to pay bills and save up for a second down payment. For the first while, you need to pump money into this system to make it work.

      Realistically, you would need $25K to start this and you would be taking a tremendous risk in the current housing market. It’s a ton of work, and the risk has never been greater. Instead, I would rather you start saving. If you would like to go over some strategies, I would be happy to meet with you over e-mail, in person, or the telephone.

      Allan Madan and Team

  58. JohnXu says:


    I just bought a property. I will not be living there for the first 2-3 years, but I will be renting it out. Can I use incentives like the home buyer’s tax credit on it? Is the 5% down payment legitimate for this property?

    • superAmin says:


      A qualifying home is generally considered to be a housing unit located in Canada that the individual or individual’s spouse or common-law partner intends to occupy as their principal place of residence no later than one year after its acquisition. This is a according to

      Considering it will not be your primary residence, you will not be eligible. In addition, the CRA will flag the sale of the property as capital gains and tax you accordingly.

      Allan Madan and Team

  59. Timmy says:


    I bought a pre-construction home in 2012 for around $250K. I moved in 2013, and only stayed for about a month before realizing the city was not for me. I then rented it out. Now, I am thinking of selling. Can you tell me what the capital gain would be calculated it?

    • superAmin says:


      Your adjusted cost base will be what you paid for the property, plus any money you put in that increased its value that you were unable to claim as a tax deduction. Examples of this include appliances, painting or other renovations, repairs, etc. Also, add on realtors fees and inspections related to the sale.

      Your capital gains will be the difference between the sale price and the ACB. For more information, please visit Because you also lived there, you may be eligible for the principle residence exemption for a portion of your gains. If you have any further questions, please don’t hesitate to contact me immediately.

      Allan Madan and Team

  60. Abraham Radmilo says:


    I’m currently in talks with my son about whether he should rent an apartment or I should buy one and have him pay me. I understand that it is not my principal residence, so I would have to pay capital gains on sale. Is this correct?
    He can afford monthly payments but does not have anything close to a down payment. He is single, 30 years old, and has missed some credit card payments. I am currently just checking what the options are.

    • superAmin says:


      You are correct, in that the principal residence exemption does not apply here. You would have to pay capital gains tax if the property increased in value from when you purchased it. If you can gift your son a down payment and he can make monthly mortgage payments on his own, you would be giving him an enormous leg up in life while still making him work for it.

      However, consider this. Do you want to support him? It may be easier to subsidize him if you own the property and let him stay there at below-market rents. But, that may cost you more than just letting him rent somewhere and writing him a cheque. And if you don’t want to support him, then just let him rent.

      Giving him a down payment would be more straightforward than other options; him renting on his own the most straight-forward.

      Allan Madan and Team

  61. John MacCarthy says:

    Hello, I bought farmland 2 years ago as an investment for $100000 and am now selling half of it for $150000. (Fair market value of each half at the time of purchase was $50000. (It was already subdivided). On paper this is a $100000 profit, however, I am not receiving the full amount, as I am carrying a mortgage at 5% for 2 years, or until the buyers can sell their farm and pay me the full balance. ( I have received a $15000 down payment and monthly payments are $800) My 2 questions are
    1. how do I report the sale to CRA as at this point there is no profit and wont be any profit until I receive the full amount. (IE, so far I have invested $100000 and by the end of this tax year will have received $15000 plus the 5 months of $800 payments)?
    2. Do I wait to report the profit until I actually receive the full balance owing (the thought being if the buyers default and don’t actually pay me anymore, I will have payed tax on money that I did not receive)
    I understand that CRA will likely rule this as business income and not a Cap Gain and am trying to prepare for that. Thank you so much.

    • amadan says:

      Hello John,

      There can be many things to consider here.

      1) Are you in the business of purchasing farmland and selling it thereafter? Doesn’t seem like it. The CRA will look into many factors to determine whether or not it will be either a sale of capital property (capital gain), or business income. Based on the information provided, it seems like it will be a capital gain, since this is a sale of a capital property, but we say that based on limited facts.

      2) If this is a sale of qualified farm property, you may be eligible to use the lifetime capital gains exemption to completely eliminate the capital gain on the property.

      3) If this is a capital gain that must be recorded and paid tax on, then you may be eligible to defer the recognition of the capital gain to the proportion of the proceeds that you receive. You can only do this for 5 years, however.

      There is a lot more to consider, but the above three points should give you a good idea as to what to look into.

  62. Pauleen Brigham says:

    Hello! I recently won a home in a regional lottery. I already own a home and do not intend to move into the house I won. What are the tax implications if I want to sell the home I won in the lottery?

    • superAmin says:

      Hi, if you decide to sell the home you won, the CRA will calculate your capital gains based on the difference of the market value when you won the home, and the market value when you decide to sell. The longer you wait, the better chance you’ll owe capital gains tax.

  63. HFinch1 says:


    I am a father of two with a wife. I am currently thinking of selling our first house, in order to move to a better part of the city. The house was gifted to us by my now-deceased parents. I have recently consulted a real estate agent concerning this matter. They have encouraged me to underprice my home, to start a bidding war in order to obtain the best price for my home. What are your thoughts on this matter? Also, my real estate has told me they will be taking a commission of 5%. Is this a lot?

    • superAmin says:


      As a seller, I believe you should encourage a bidding war. The auction process is part of the price-discovery process. Auctions are part of many different industries, such as the US treasury market and agriculture industries. Underpricing can help you create additional buzz for your property. In terms of commission, 5% could be a lot depending on how much you’re selling your property for. It might be worth your while to consider writing the real exam yourself. You’ll be more motivated to sell if it’s your own property, and you may be able to turn real estate into a career if you enjoy it enough.

      Allan Madan and Team

  64. Joss Dreschner says:

    Hi, I want to sell the property I use to farm. I want to buy more land out west to start a similar farm. Are there any tax implications that I will face if I go through with this plan?

  65. worstnameever says:


    My parents have recently retired, and they are moving to the Bahamas. They are giving me their condominium. I am thinking of selling it, as I have no use for it. My question is this. What is realty tax? Is it the transfer tax when you buy property, the municipal tax or both?

    • superAmin says:


      Realty tax means the property tax that the city collects from each property. This is a municipal tax, and it goes towards paying for schools, roads, and infrastructure. You could classify this tax either residential (houses) or commercial (business buildings). The latter could also include a business improvement tax.

      Allan Madan and Team

  66. bryansuharly says:

    My partner and I own a house in Milton (worth $203,000.00), and we have moved to a rental house in Oakville. My mom has owned the house for over 30 years. My plan is to keep our Milton house, and then purchase this house from my mom next year.

    We tried to consolidate some of our bills this year, but we were turned down because our debt ratio is too high. We owe approximately $100,000.00 in consumer debt, and we have about $10,000 equity in our Milton townhouse. Would you recommend that we sell our Milton townhouse so that we can lessen our debt ratio? Or, should focus on paying down our consumer debt over the next year?

    • superAmin says:


      The first thing for you to do is figure out why you’re racking up so much debt. No amount of asset liquidation (i.e., selling your house) is going to help you till you stop spending money. Secondly, I have noticed you have almost no equity in your home. By the time you sell your property, your costs will more than exceed your profits. The fact that you have been turned down for a consolidation loan should have been a wake-up call for you.

      I suggest you get on a budget where you are not spending more money than you make. To get your $100,000 in consumer debt paid off in three years will cost you almost $3,000 a month. If you would like to further discuss your situation, I would be happy to assist you.

      Allan Madan and Team

  67. Robby says:

    Hello, I just received a job offer in Quebec on a 3 year contract. I currently live and own a home in Ontario. I want to rent a condo in Quebec, but I also want to keep the house in Ontario as I believe the value will keep going up. I bought it at $300,000 in 2010, right now it is worth $450,000 and I expect it to be valued at $550,000 in 2017. I was wondering what the tax implications would be if I rented out the house in Ontario and also rented a condo in Quebec.

    • superAmin says:

      Hi, ordinarily, when you move back into your Ontario home, there would be a deemed sale for $550,000. The increase of the $100,000 in the three years would be treated as a capital gain, half of which is taxable at your marginal tax rate.

      To prevent this, you should file an election pursuant to section 45(2) of the income tax act, which will allow you to claim your Ontario home as your primary residence even if you move out and rent it. When you move back in in 2017, you have to attach the election from with your tax return for that year.

      By filing the election your Ontario house will be treated as your primary residence for the years that you moved out and you will not be liable for any capital gains tax. Plus, you can claim the principal residence exemption for all years you reside in the house until you decide to sell.

  68. Antoine Mcbride says:

    Hi, I have a house that I would like to sell to my son at a discount. The property is worth $100,000 (I bought it at $50,000 many years ago) and I want to sell it to my son for $60,000. Is there any downsides to selling the property at a discounted rate?

    • superAmin says:

      Hello Antoine, it would be wise to not sell the property at a discounted rate to your son. If you sell the property worth $100,000, you will have to pay taxes on a $50,000 capital gain. Your child will receive the property with a cost base of $60,000. If he eventually sells the property for $150,000, he would face the taxes payable on a capital gain of $90,000.

      Instead of the discounted sale, you may want to consider selling the property for the full $100,000. You can set it up so that your son pays $60,000 in cash, then set up an I.O.U or a loan for the remaining $40,000. You could also gift your son $40,000 to pay off the remaining amount. With this scenario, you will still have to pay taxes on the $50,000 capital gain, but at least your son will have a full $100,000 cost base.

  69. Lanny Fitzroy says:

    Hi, I was wondering if it is a good idea to invest in real estate with excess money in my RRSP.

    • superAmin says:

      Hello Lanny, if you understand how to invest in real estate and have RRSPs in your portfolio, you could consider a higher-interest-rate first and second mortgages. The process is very simple. Find a bank that allows you to open a self-administered RRSP and is willing to act as a trustee for you to make second mortgages from your RRSP.

      Keep in mind that RRSP mortgages should be understood as financial transactions backed by real estate security. If you use your RRSP to invest this way, develop an exit strategy. You need to know three things:

      • How will you get your money if the borrower stops making payments?
      • Can you sell your mortgage to another party if you need cash?
      • What happens when the term on the mortgage expires? Is there an instant renewal or are you paid off?

      There is obviously some risk involved with having higher-interest-rate earnings. Remember to do your due diligence on the person to whom you are lending money. The most important thing to remember is that an RRSP mortgage is a complex investment strategy and there can be major tax implications if it is not done correctly. Before you decide to invest with an RRSP mortgage, make sure you talk to a real estate or accounting specialist.

  70. vgom says:

    I owned a house for about 5 years and we sold it about 5 years ago. My fiancé never owned a home. are we eligible for the first time home buyer tax credit in Ontario?

    • superAmin says:

      The eligibility of your question is based on whether or not you both are considered spouses. Because you have not owned property while with your fiancé, you are clear to apply for a first home buyers credit. The second factor is that you and your fiancé qualify as common law spouses or if you two marry before buying the property.

  71. Ralph says:

    Hello, I have sold some investment real estate (October) and will now have to pass some capital gains. When do I pay these capital gains? The capital gains amount is around $45,000. Are they due immediately or are they due on April 30th? Thanks Ralph

    • superAmin says:

      Hi Ralph,

      Only half of the capital gain of $45,000 is taxable. The taxable portion will be included in your income in the year the gain was realized, and will be taxable at your marginal rate. For example, if your marginal tax rate is 40%, you could expect to pay $9,000 in taxes in respect of the capital gain realized ($45,000 x 50% x 40%). The taxes are due upon filing your tax return, i.e. April 30.

  72. Kathleen says:

    Hi, I am planning to start real estate investing soon to hopefully make more money. I was wondering if it is smart to open a new bank account for the investments, or can I just use my current bank account?

    • superAmin says:

      Hello Kathleen, many new investors think that tying their personal and investment bank accounts together, so that they only get one statement to review. However, this would probably be the worst thing to do! While you may need to be able to transfer money into your business account from a personal account, keeping a single bank account will cause confusion over whether certain transactions are for business or personal purposes.

      You should open a separate bank account for all of your real estate investment business transactions. This makes it easier for you to track money in and out, helping you make better business decisions and keeping the CRA at bay.

      Also make sure you can transfer money in and out with ease. If you need to meet an expense and there is a shortage of funds in the business account, you need to be able to transfer money into that account easily.

  73. Mia says:

    My husband and I own a rental home in Quebec. We are going to separate and were looking to sell the house. The problem is the tenant we are currently renting to has 10 more months left on the lease. Is there any legal way to break the contract with him? Or do we have to wait until the lease expires?

    • superAmin says:

      Hi Mia, the only way to get him to break the lease is to offer him some financial considerations. The rule of thumb is usually three months’ rent. If he does not accept any financial offers, you will have to give him six months’ notice stating that you will regain the house for you own use. Make sure you contact a real estate expert to make sure you have all the information you need.

  74. Leo Samuels says:

    Hi, quick question: I have a statement of adjustment and a trust ledger statement from the house I just bought. I was just wondering how I should keep these documents. Am I allowed to share these with my accountant or lawyer?

    • superAmin says:

      Hello Leo, yes, you should share these documents with your accountant! The information in those documents are used to determine the correct total costs of the property and any required adjustments to the income for the period. It is also ideal for future reference, years from now, if the CRA asks for evidence of the adjusted cost base of the property when the property is sold.

      If you want to avoid the pre-tax-deadline-scramble, you should forward them to your accountant as soon as possible. This gives your accountant time to clarify entries, make his or her own notes and complete any work well in advance of the tax deadline rush.

  75. Derrick Lum says:

    Hi, I recently took out a loan to use for investment property. I was talking to a friend and he said it was possible to deduct some interest on an investment loan. Is this true? If so, how can I take advantage of these deductions?

    • superAmin says:

      Hello Derrick, yes, you may be able to deduct interest paid in respect of an investment loan, only if you meet the following requirements.

      1) The loan cannot be implied, it has to be bona fide.
      2) Interest must ultimately be paid.
      3) The loan must be documented with a rate of interest, terms of repayment, an amortization period and a term for the duration of the loan.
      4) The funds should be traced directly to the investment, which must be real.

      Most interest paid on monies borrowed for investment purposes is tax deductible at this time (the CRA is currently working with the rules). Usually, interest paid on money borrowed for investing in the stock market is tax deductible, even though some of the stocks have a limited potential to earn dividend income. When it comes to real estate investing, the CRA has tried to limit the amount of interest deducted so that you cannot get a loss from an investment property.

      When dealing with loans, your objective is always to pay off loans where the interest is not deductible for tax reasons. If you borrow $100,000 and your interest rate is 6%, then your interest payments would be $6,000 (assuming it’s compounded annually, and more if compounded semi-annually). If the interest is tax deductible, your loan just got cheaper by the amount of taxes you saved based on your marginal tax bracket. So, if your marginal tax rate is 22%, your tax savings are $6,000 x 22% = $1,320. If you are in a 42% tax bracket, your savings would be $2,520.

      Traceability is one of the factors that make loan interest deductible; typically, the CRA follows the direct flow of money. If you borrow $100,000 and deposit it in your lawyer’s trust account and use it for a down payment on rental property, it becomes directly traceable.

  76. Supatra says:

    My house where I live at the moment is free and clear, has no mortgage. But I would like to buy myself another house to live in and rent out the one I live in now. Would I be able to claim the interest on the new mortgage I put on the house I live in now which I intend to rent out after I buy my new house ? any advise would be greatly appreciated..

    • superAmin says:

      Hi Supatra,

      For you to be able to deduct interest, you have to show that the loan you’ve borrowed went to purchasing/investing your investment property. Since the new mortgage you will take will go towards the new house you will live in, you won’t be able to deduct the interest on that mortgage as rental expense. There are ways around that involves incorporating a company and the company taking the title to the rental property. This alternative is rather complex and you have to weigh the cost/benefit of this strategy. Please contact me for more details.

  77. Scott says:

    My wife and I own a house in Victoria that we lived in until transferred for work in Sep 2012. We rented the house out (hoping to return to Victoria) and effectively changed the use to a rental property. With little prospect of returning to Victoria in the near term we are now looking at selling the property. If I read it all right the capital gains to be reported would be the change in FMV from Sep 12 to the time of sale. However, how do we figure out the FMV for Sep 12? Is a municipal tax assessment for the year of the change of use indicative of FMV (that is how the municipality says it sets value but what about CRA?). Thanks.
    PS. Great site.

    • superAmin says:

      Hi Scott,

      The capital gain is equal to the difference between the selling price (less legal fees, and commissions paid to a real estate agent) AND the fair market value (FMV) of the home at the time it was converted into a rental (September 2012). Only have of the capital gain is taxable.

      You can obtain a valuation from a certified appraiser or from a qualified real estate agent. The tax assessment value is not acceptable.

      Thank You,

      Allan Madan, CPA, CA

  78. Nick says:

    Hi Allan, great video. Just want to be clear on the sale of a rental property by a non-resident of Caanda. i now live in the US but own a rental property. we have paid taxes yearly to the Canadian givt on the rent received. i bought the house for 100K and will sell for $120K. I will put $10K into it when just prior to sale (carpet, baths). as a non-resident what is the process. what is the tax i will pay? ($120K value less cost of $100K + $5K = $15K divided by 2 = $7,500 taxable cap gains?). Is this right? Why have i read that the govt wants to hold 50% of the gross sale price? Can i avoid this? Please let me know your thoughts. Thanks!

    • superAmin says:

      Hi Nick,

      The capital gain will be equal to the difference between the selling price (less commission and legal fees) AND the adjusted cost base of the property (ACB).

      In your example, the selling price is $120,000. The ACB is calculated as the original purchase price of $100,000, plus improvements made of $10,000, which equals $110,000. As a result, the capital gain realized on sale will be $10,000 (i.e. $120,000 – $110,000). Only half of the capital gain is taxable, which is $5,000 in this case.

      As a non resident, withholding tax of 25% applies to the gross selling price (i.e. 25% x 120,000), unless a clearance certificate is obtained from the CRA. My fee for filing the application for a clearance certificate is $900.

      Please contact me a couple of month’s prior to your decision to sell, so I can help you.

      Kind Regards,

  79. Clancy D. says:

    Hi Allan, I am a new real estate investor. I was doing research on capital gains and how they will affect me. I am not finding a lot of information about it, so I was wondering if you could help me out a little bit.


    • superAmin says:

      Hello Clancy, let’s say you bought a property for $100,000 twenty years ago. If it’s your only rental property that you own, and you sell it for $250,000, your profit from the property is $150,000. Your taxable capital gain would be $75,000, so the tax you pay will be based on your marginal tax bracket.

      You will also have to be aware that the CRA looks for intention in terms of capital gain. Here a few examples of how they may view the various transactions:
      • You buy a rental property and keep it for several years. This puts you in the business of earning rental income. When you sell the property, the sale of the property would likely be a capital gain.
      • If you buy a presale condo and sell it prior to possession, the transaction was probably in the nature of trade and therefore taxable as regular income.
      • You buy vacant land, subdivide it and sell it. Again, this is probably a transaction in nature of trade, which would result in regular income.
      • If you buy a fixer-upper property, fix it and sell it in a short period of time, you are also likely making transactions in the nature of trade.

  80. Petra says:

    Hi, I am buying my first rental property. I hear that I will get a capital gain automatically if I sell the property later on. Is this true?

    • superAmin says:

      Hello Petra, in your situation, this may not be true. The CRA looks for certain parameters when deciding to treat the profit on sale of real estate as capital gain or regular income. Capital gains are only half taxable, whereas regular income is fully taxable. In most cases, you would prefer capital gain treatment.

      Some of the questions the CRA will ask to help them determine whether a capital gain or regular income is realized are:

      • What was your intention at the time of purchase? This just means that are you looking to gain profits from a rental property, or using the property for yourself, or is the intention to gain a profit on the future sale of the property?
      o Will I able to implement my plans?
      o Am I thinking of flipping?
      o Will I list the property prior to or shortly after possession?
      • What is my knowledge of the business? If you are a real estate agent, you will know more about real estate than a regular person
      • Do I have a record of previous purchases/sales? Will those say what my intentions are for this property?
      • How long will I keep the property?

      The answers to these questions will ultimately determine if you will acquire a capital gain or regular income upon the sale of the property.

  81. Andrea says:

    Hi Allan, I’m hoping you can assist me with some personal taxes.

    Here’s my situation:
    I’ve been abroad for a number of years now. Started first travelling, then I’ve worked off and on (and paid taxes) in Malaysia and Singapore. Currently we are living in Hong Kong. I have not been filing a Canadian tax return, which (according to advice I got years ago) means I am considered a non-resident for Canadian tax purposes. ?
    At some point this year my husband (a UK passport holder) and I plan/ hope to buy a cottage in Ontario. We have the idea of using it a few weeks for ourselves and renting it out for income at other points throughout the year.
    I’m hoping you can advise how this would work for tax purposes.

    • superAmin says:

      Hi Andrea,

      Thanks for contacting me. A cottage in Canada that is available for your use can create a ‘primary tie’ to Canada for you. Even if you only have 1 primary tie to Canada, you could be considered a tax resident of Canada. On the other hand, the cottage is not available for your personal use for most of the year (while it’s rented), and therefore isn’t a ‘primary tie’ to Canada.

      You could seek relief from taxation in Canada pursuant to the Honk Kong – Canada Tax Treaty. The treaty tell us that where you have a home in both countries (HK and Canada), you are considered a resident of the country where your personal and economic ties are closer to. If your ties are stronger to HK than Canada, you will be considered a resident of HK pursuant to the tax treaty.

      Non residents of Canada must remit monthly tax to the CRA equal to 25% of the gross monthly rents collected, and must file a Section 216 Non Resident Return each year. A waiver, Form NR6, can be filed to reduce the monthly withholding tax.

      Allan Madan

  82. Geetha says:

    My husband and I own a rental condominium in Toronto. Since I was the lower income person, and the rental property was generating a net income, on the income tax filing, we indicated that 100pct is my share. Now when we dispose it off, is the capital gains attributed to only myself or it can be split between both of us?

    • superAmin says:

      Hi Geetha,

      Unfortunately, allocation rental income is not as simple as that. The allocation is based on each partner’s % of equity contribution to the purchase of the property. For example, assuming no down payment and a mortgage under both husband and wife’s name, then the allocation would be 50/50. If you can prove that only you made the contribution to the purchase of the property, then you must report 100% of rental income and capital gain.

  83. Frank says:

    Hi Allan,

    I currently own 3 real estate properties, one is my principal residence (Property 1) and 2 are income rental properties. All Properties are under my name and my common in law wife.

    - I was thinking to start 2 corporations and put each rental under one corporation. Reason for it, is for Liability purposes and Asset protection, I watched a video of yours that sometimes is even good to have a Holding Company attached to each Corporation.

    My questions to you are:

    1)- Can we do that ? Will the bank accept a change of Title on the properties ?

    2)- When transferring the property to the corporations, are there any tax consequences with CRA ?

    3)- The income under the corporation, can that qualify for the lowest Corporate tax rate in Ontario of 11% ?

    • superAmin says:

      Hi Frank, the answers to your questions can be found below:

      1) You can transfer property to a corporation, but you must obtain the bank’s approval first. Land transfer tax will apply to the transfer.

      2) Unless you and your wife elect under Section 85 of the Income Tax Act and complete the relevant paperwork, capital gains tax will apply on the transfer. The selling price on the transfer will be deemed to be equal to the market value of the property at that time.

      Section 85 of the Income Tax Act allows property to be transferred by a shareholder on a tax free basis to a Canadian corporation.

      3) The small business corporate tax rate does not apply to rental / investment income earned by a Canadian Controlled Private Corporation (CCPC). CCPC’s pay corporate tax of approximately 48% on rental / investment profits. This is the combined Federal + Ontario corporate income tax rates.


      Allan Madan

  84. Brian says:

    Hi Allan,
    My friend and I are currently going into business together as 50/50 partners flipping houses in Ontario, Canada. We will require bank financing for property purchase and renovation costs. Could you please advise me on what the best business structure is for purchasing/holding property and distributing after sale profits out to each of us? Should we set up a Corporation or LP? We would also want some liability protection and I am aware the profits will be taxed as full business income with no capital gains exemption available.

    Thanks for your help!
    Best regards,

    • superAmin says:

      Hi Brian,

      When filliping real estate, the property being flipped is treated as ‘inventory’ instead of a ‘capital asset’. The profit earned on the sale is classified as business income and is fully taxable.

      Fortunately, small business corporations in Ontario pay a combined (Federal + Ontario) income tax rate of only 15.5%. This means if your corporation made a profit of $100,000 in the year, the resulting tax would be $15,500.

      Because of the tax advantages and liability protection provided by a corporation, I recommend that you purchase real estate (to be flipped later) in the name of a corporation. You and your business partner will become shareholders in this corporation.

      I can setup the corporation for you, provide tax planning and advice and file the company’s annual tax returns. Please let me know if you would like to discuss further.


      Allan Madan, CPA, CA

  85. Darren says:

    I purchased a second property in 1974 which was my principal residence at the time. In 1996 my wife’s principal residence in the city was sold and our second property then became our principal residence. We have lived here since then. We have made many renovations and improvements over the years, but we don’t have any records to show what monies have been spent on upgrading. When the time comes to sell, is there a formula that can be used to determine the amount of taxes to be paid for capital gains?

    • superAmin says:

      Hi Darren,

      In order to increase the Adjusted Cost Base of the second property by the amount of the improvements made, you must have records (e.g. improvements) to back up your claim.


      Allan Madan, CPA, CA

  86. Jeffery says:

    Hi Allan, I am a new real estate investor. Sorry if this is a dumb question but should I be using the Capital Cost Allowance as a tax-free and interest-free loan from the CRA?

    • superAmin says:

      Hello Jeffery, a lot of new investors have the same question because buildings do not go down in value until later in their or if they receive insufficient maintenance. There is no right or wrong answer to this question, it all depends on your personal business plan.

      The CRA allows you to slowly deduct the cost of a building over time. Various exceptions and restrictions exist, but for residential buildings, the CCA rate is typically 4% a year. This means that every year you the possibility to deduct 4% of the cost of the building which you haven’t previously deducted.

      This is where your business plan comes into question. In the future, if a building sells at a value greater than the cost, the CRA will include all previously claimed CCA into your income. Because of this, almost every real estate investor will never claim CCA if you are able to use the principal residence exemption on a property. The principal residence exemption can make the profits on the sale of a property tax-free. Claiming CCA will make the property ineligible for the claim and cannot be changed retroactively.

  87. Meghan says:

    Hi Allan, I am a new real estate investor and want to buy a house to rent out. I hear people say real estate is about “location, location, location!” There is a lot of locations out there! I was wondering if you had any insight on where the best location would be for buying a house for the sole purpose of renting.

    • superAmin says:

      Hi Meghan, from my real estate experience and from the information I have gathered from real estate investors I have talked to that deal with buying houses that they will rent out. The general consensus seems to be that you should find a property in a neighbourhood that is between 10 and 35 years old. These neighbourhoods are typically filled with the average middle-class people. Neighbourhoods that are less than 10 years old tend to be a lot more expensive and will be a lot harder to find a renter. Neighbourhoods that are older than 35 years old tend to be more run down in and declining areas of the town. Obviously this is not the case in all situations, but finding a house in the 10-35 year old neighbourhood is a good starting point for young investors.

      Contact an independent real estate specialist if you want more, in depth information!

  88. Tiffany says:

    Hi Allan, are there any tax implications to refinancing a property that I own personally?

    • superAmin says:

      Hi Tiffany, when you refinance a personally owned property, the interest you paid on the loan may or may not be deductible. It really depends on what you used the funds for. If they were used for personal use, the interest is not deductible. On the other hand, if you used the money for qualified investment purposes, the interest will be deductible. The funds received on refinancing will not be taxable. Refinancing a property, especially if it is a corporate property, is a lot of hard work with many different rules. Always be sure to tell a tax professional what your plan is, as you cannot plan your tax strategy retroactively.

  89. Charles says:

    Hi Allan, a friend has recommended that I should look into something called Refundable Dividend Tax On Hand in terms of using it to cut down on my corporate real estate taxes. I have never heard of this deduction and was wondering if you could explain it a little bit to see if I can qualify to use it.

    • superAmin says:

      Hi Charles, rental income is usually considered “inactive” income, although there are some exceptions, and applicable corporate tax rates can be high (48.67% in Ontario). It is possible to pay out dividends from the company and receive the Refundable Dividend Tax On Hand (RDTOH), which translates into a refund of 26.67% of the corporate taxes paid. Instead of paying corporate taxes of 48.67% on rental profits, the net tax will approximately be 22%, after accounting for the RDTOH.

      In paying the dividends, personal taxes will result to the shareholder. That leads to the question: How much in taxes will the recipient pay? The majority of dividends paid to Canadian residents are taxed in a very favourable manner as compared to other sources of income. It is possible to pay around $36,000 of dividends to a resident of Ontario without triggering any personal taxes (other than the $450 Ontario Health Premium) due to the “dividend tax credit.” This strategy can be particularly attractive where several shareholders with otherwise low levels of income can earn the dividends.

  90. Ian says:

    Hi Allan, I was wondering if there were any tax advantages for setting up a family trust that will help with my real estate sales. If there are, would setting one up be worth it in the end?

    • superAmin says:

      Hello Ian, creating a family trust for the purpose of investing in real estate can have tax advantages if you plan and create it properly. Here are a few points you will want to keep in mind when deciding if a family trust will work for you.

      • A family trust is generally taxed at the highest rate of tax unless it allocates income to a taxable beneficiary.
      • Beneficiaries are generally family members and potentially an investment corporation. When dividends from an active corporation are paid to a family trust, the full amount of the dividend is often allocated between beneficiaries so the family trust does not have taxable income.

      A family trust is not a Do-It-Yourself project. You will need the help of a lawyer, accountant and even an appraiser. You will also need an accountant to coordinate the trust and determine the tax consequences of its creation.

  91. Stephen says:

    Hi, I have owned a rental condo in Toronto for 5 years and now have an offer-to-purchase agreement that was signed in December 2014, with the closing and possession date being in January 2015. Question: for CRA reporting of the taxable capital gain (assuming the sale goes through) am I correct in assuming that I would report in 2016 because the “sale” is considered to have taken place in 2015 and not 2014? Thanks for your clarification…

    • superAmin says:

      Hi Stephen,

      Since the closing date is in January 2015, the capital gain must be reported in the 2015 tax year. The due date for filing a Canadian personal tax return for the 2015 year in April 30, 2016.


      Allan Madan, CPA, CA

  92. Bryan says:

    Hi Allan,

    I am a regional sales person with more than 30% of my income in the highest tax bracket. My residence is in BC but I have a rental property in Calgary and I work about 25% of my time in Alberta, Are there capital gains issues if I swap my declared residence to Alberta? Are there requirements for how much of my time i spend in Alberta?

    • superAmin says:

      Hi Bryan,

      If you move into your Alberta rental property and make that your primary residence, there will be a deemed disposition (sale). The sale price will be deemed to be equal to the fair market value of the property at the time you move into it. Any capital gain realized will be taxable to you.

      To be considered a resident of Alberta, you must prove that your habitual abode is in Alberta; this means you ordinarily live in Alberta as opposed to BC.

      Allan Madan, CPA, CA

  93. Arthur says:

    My sister and I bought a house in 2008 in Winnipeg (both our names are on the mortgage). My sister lived in the house while I worked and rented an apartment in Toronto. I retired in 2013 and moved into the house and consider it to be my principal residence. What tax implications are there if I sell the house next year?

    • superAmin says:

      Hi Arthur,

      When you sell the house, your sister can claim the principal residence exemption on her share (50%) of the gain. As a result, she won’t pay any capital gains tax so long as she lived in the house for all of the years that she owned it.

      However, you will have to pay capital gains tax for your share of the gain realized on the sale of the home. You can claim the principal residence exemption only for the years that you lived in the house.

      I can calculate the estimated about of tax payable by you on the sale of your house. Please email me to ask about fees.

      Allan Madan, CPA, CA

  94. income tax montreal says:

    If you deposited the maximum amount for the year, then withdraw money, you need to wait until next year to deposit the money back in or you’ll be charged as over contributing. But, the withdrawal you made will be added to your next year’s contribution room without you being charged any fees. If you’re switching TFSA accounts, you can transfer the money from one TFSA to another without any tax consequences, but you need to make sure it’s done by the financial institution.

  95. NATALIA says:

    I’ve bought a house in 2013 as an investment. Now I am planning to sell it. Should I pay HST? Thanks in advance.

    • superAmin says:

      Hi Natalia,

      Thanks for your question!

      The CRA has published various memos dealing with GST/HST issues and real property which may be helpful:

      In general, the sale of real property is taxable, as it is considered to be a “Commercial Activity” under ss. 123(1) of the Excise Tax Act (“ETA”) – unless specifically exempted under the Act. Most exemptions for the sale of real property are provided in Part of Schedule V of the ETA, and generally apply to:
      • sales of previously occupied residential complexes,
      • sales of certain types of leased land,
      • sales of farmland to related persons, and
      • sales of real property made by an individual or a personal trust with certain exceptions (see paragraph 5).
      Your situation likely falls under the first category of sales of previously occupied residential complexes, and as such would be exempt from GST/HST. Please note however, that a concrete answer cannot be given without knowing the exact details of your situation.

      Please do not hesitate to contact us if you have any further questions, as the indirect tax implications of real estate transactions can be complex.

  96. Adam says:

    I want to transfer a 1% interest in a rental property to a CCPC of which I am the president and sole member. I have been taking CCA on the building. What is involved in doing the transfer, and are there any immediate tax consequences?

    • superAmin says:

      The following tax consequences could arise on the transfer:

      1. Capital gains tax on the amount by which the market value of your interest in the property exceeds the purchase price. Capital gains tax can be avoided by rolling over your interest in the property pursuant to Section 85 of the Canadian Income Tax Act to your Canadian Controlled Private Corporation.

      2. Land transfer tax on the market value of your interest in the property at the time of the transfer

      Please contact me if you would like to discuss this further.

      Allan Madan, CPA, CA

  97. Geoffry says:

    So im going to sell one of my houses this year. What are my options to lower my capital gains.
    - I lived in the house for first 2 years as principal. Think ive had it 6 years now
    Also I was told revenue canada give a break by letting me decide wich house i want to declair as personal house. If i declare this one, that just means my house in hamilton will be my house which capital gains are going to be. Does this sound right?

    • superAmin says:

      Hi Geoffry,

      You can elect to claim the principal residence exemption for a house that you ordinarily resided in. If you had two houses in a year and you lived in them both throughout the year, then you can only claim one house as a principal residence for that year. You can make the decision on which house to designate as a principal residence on a year-by-year basis, and your decision does not have to be consistent.

      For the house that you lived in for 2 of the 6 years that you owned it, you can claim a principal exemption for 1/2 of the gain. The formula is as follows:

      (A) 1 + Number of Years Lived in
      (B) The Number of Years Owned

      Principal residence exemption = (A) divided by (B) x The Gain on The Sale of The property. Thus, you can exempt 50% of the gain on the sale of the house from tax through the principal residence exemption.

      Allan Madan, CPA, CA

  98. Raj says:

    Incorporating a Developing( Building the Vacation home) and Renting Vacation Rental buisness, Is this Small business an Active or Passive when your averge rental periods are from 3-7 Days. Company has 2 shareholders. Thanks for your advice

    • superAmin says:

      Hi Raj,

      An “active business carried on by a corporation” means any business carried on by the corporation other than a specified investment business or a personal services business.

      A specified investment business is defined as a business in which the principal purpose is to derive income from property such as interest, dividends, rents and royalties. While you may think you’re carrying on an active rental business, unless you have more than 5 full-time employees your business is really a specified investment business.

      Best Regards,

  99. Philomel says:

    Hi, the question I have is that I recently had a rental property that was rented for a person to live in (ie, it wasn’t a commercial property) that had severe damage due to a fire. The insurance company repaired the property (I received no cash… they repaired it 100%). Once it was finished, I then re-rented the property.

    My question is do I need to declare capital gains on the property if I haven’t sold it?

    • superAmin says:

      Hi Philomel,

      If you changed the use of the rental property from rental-use to personal-use, then there will be a deemed sale of the property at its market value at that time. This will trigger a capital gain.

      However, if you continue to rent the property, a capital gain will only become taxable upon sale.

  100. MIranda says:

    Hi Allan,
    Is it necessary to have an appraisal and to separate land from improvements in the ACB and at the point of sale for rental property? Thanks.

    • superAmin says:

      Hi Miranda,

      An appraisal report should be prepared at the time of purchase and the time of sale, separating the land and building portions.

  101. Matilde says:

    I bought a House in 2011 with purchase price of $245000 GST included. I sold my property 2015 $440,000, commission $19,888. Legal fees 1200, windows changes 600 land Transfer tax paid once it was purchase $2,153.36 and legal fees for the purchase 1300, penalty for break the charge 5500.00 = = 164358.64 the property was under my husband an myself name. HOW MUCH I HAVE TO PAY IN CAPITAL GAINS. THANKS

    • superAmin says:

      Hi Matilde,

      You will have to pay tax on $41,089.66. Further explanation is as follows.

      Capital Gain calculation:-

      Proceeds of Disposition:- 440,000

      Less:- Actual cost base = $ 245,000
      + Renovation = $600
      + LTT on Purchase = $2,153.36
      + Legal fees = $ 1,300 ( 249,053.36)

      Less:- Outlays on Selling
      1) Commission = $ 19,888
      2) Break of Mortgage Penalty = $5,500
      2) Legal fees= $ 1,200 (26,588)

      Net Capital Gain 164,358.64

      Your Share of Net Capital Gain (50%) 82,179.32

      Taxable portion of Capital Gains is 50% 41,089.66

      Estimated marginal tax rate is Approx. 22%, hence tax payable on this gain = $9,039.73

      Marginal Tax rate shown above is an estimated percentage. Your Marginal Tax rate is subject to change depending on your total taxable income. We don’t know your taxable income to give you the accurate tax rate and taxes payable.

      Best Regards,

  102. Lisa says:

    We converted our principal residence to a rental in 2010, and sold it in 2014.
    I’m trying to figure out how and what to report for this.

    For proceeds of disposition, is this the price the rental house sold for?
    For adjusted cost base, is this just the fair market value of the property in 2010? (We remortgaged the property at the time for 90% of it’s FMV, if that makes sense)
    For outlays and expenses, is this everything, including lawyers and real estate agent fees, and the remainder of the mortgage that was paid back to the bank?

    I’m guessing that adjusted cost base doesn’t include improvements to the property while it was a rental, as these were claimed as rental expenses during the years is was rented… is that correct?

    Am I missing something?

    I really hope what I’m asking is clear! Thanks

    • superAmin says:

      Hi Lisa,

      • Yes, when the property is actually sold, “proceeds of disposition” generally mean the amount the property is sold for.
      • Yes, the adjusted cost base of the property is the fair market value of the property in 2010 (on the date the change in use occurred).
      • Renovations that increase the useful life of the property or improve the property beyond its original condition should be added to the adjusted cost base of the property. Only repairs and maintenance (ex. paint costs) expenditures are to be expensed.
      • Outlays and expenses include legal fees and real estate agent fees/commissions.

  103. Bob says:

    Hi, I bought a preconstruction condominium in 2010 that became ready for interim occupancy in 2014. The purpose of the purchase was for investment as a rental property. Final Closing was not until 2015. The builder did not allow the property to be rented out during interim occupancy. What is the tax treatment of expenses I have incurred in 2014: a) interest on deposit that was borrowed b)interim closing costs (legal etc) c) occupancy fees. are these counted as current expenses leading to a loss? or must they be capitalized in 2015 when final occupancy occurs?

    Thanks in advance.


    • superAmin says:

      Hi Bob,

      Yes, you can claim the same deductions on a vacant rental property as you would if it was occupied. You would do this by filing a T776, Statement of Real Estate Rentals, with your personal income tax return, where you would claim allowable deductions, such as your mortgage interest, maintenance, repairs, legal fees, homeowners insurance and the cost of advertising your rental; however, it is important to note that you cannot claim a deduction for the loss of rental income since you were unable to rent the property, and therefore had no reasonable expectation of profit.

  104. Deandra says:

    Hello Allan,

    You been doing amazing with the corporate income tax for our company which is a real estate shell company. We are planning to sell one of the properties we have, but we would like to know if this is a good moment to do it in terms for taxes, we will have some capital gains. The capital gains I am estimating is around $ 90,000.00. And the plan is to buy another property this year using this money as down payment. You may suggest another strategy to write off expenses i.e. buy a vehicle or payroll.

    Thank you,

    • superAmin says:

      Hello Deandra,

      The estimated taxes on capital gains are computed as 25% of the gain made on sale. In this case, your company can expect to pay $22,500 in taxes. The only way to reduce this gain is by (A) Deducting selling costs such as legal fees and commissions and (B) By adding improvements previously made to the ACB (cost) of the property.

      You should also be aware that the corporation’s capital dividend account will increase by 1/2 of the capital gain, i.e. by $45,000. This means that your corporation can pay a tax-free dividend to its shareholders for up to $45,000.

      We are happy you like our service!

  105. Gerald says:

    Hello Madan Team,

    My name is Gerald and lat year my mother was placed into LTC. She owned a mortgage free primary residence condo in Burlington for the last 25 years. My brother and I are now left to sell the unit. We want to assist with her LTC therefore we are trying to avoid as much capital gains as possible. We were debating on placing the money received from the sale into a joint bank account (my mother, brother, and myself) – these finds will be withdrawn to cover my mother’s health needs. If she unfortunately passes away, we want to avoid probate from whatever is left.

    What are your recommendations?


    • superAmin says:

      Hello Jeff,

      There shouldn’t be a capital gains tax on the sale of your Mom’s home since it is her primary residence.

      I hope this helped.

      Thank you,
      Madan Team

  106. Trevor says:

    Thank You for your concise article
    What about the situation were the house is purchased by your CCPC and rented back to you. It seems to me that all of the disadvantages become advantages if you are holding investments in the CCPC. The lower investment return of the rental reduces the tax disadvantage of holding investments in the CCPC, improvements are paid by the CCPC and incease the book value of the asset (reducing the cap gain when you sell), you write off tax and maint. The only downside I can see is if the market goes up and you have to declare a capital gain when you seel. But I see this as another advantage as a pop of the housing bubble would be a pretax loss.
    Am I missing something? No one seems to do this as far as I can find online. Why not?

    • superAmin says:

      I agree with your logic below. But, most individuals prefer to own their homes personally in order to take advantage of the principal residence exemption upon sale. If real estate prices continue to rise, this exemption becomes more valuable. A couple of other points to note are:

      - Land transfer tax is payable when a personally owned home is transferred (sold) to a corporation
      - Rents must be charged according to market rates

  107. Stacey says:

    First off thank you for an informative site.

    I made the mistake of buying a pre-construction condo five years ago. Originally I was suppose to move in and then I decided to rent it out so I got hit with a massive HST bill. The purchase of agreement and sale states that I paid 297,000 however, with the HST cost I had actually paid 313,000 approx (after I received the government rebate). If I sell the property for 315,000 is CRA going to hit me with a capital gain on 297,000 or can I claim the full amount actually paid on closing. The earlier comments were helpful because I saw that I can at least deduct lawyer fees, land transfer, occupancy period, and the mortgage discharge fee.

    • superAmin says:

      Hi Stacey,

      The HST paid can be added to the cost of the property. Therefore, the capital gain will be calculated based on a cost amount of $313,000.

  108. Vinita says:

    Hi I am in a unique situation. I purchased a pre-construction condo in 2012, final closing will be end of 2015. I bought it with the intent to live in it. Things changed and I received an offer from my company to relocate the the UK office in Sept. This will be before my closing and they are saying I will be deemed a non-resident of Canada.

    1. There is no FMV for this property as it is not registered. What do I do in this situation for disposition?
    2. I am hoping to rent it I am pre-approved through the builders lender with 20% down. Will I have a problem closing the condo as a non-resident. My research shows non-residents need 35% down payment. Does the bank even care?

    Would it make more sense to sell?

    • superAmin says:

      Hi Vinita,

      Thanks for contacting me. Departure tax will not apply to an interest that you have in a contract to purchase real estate in Canada. However, you should disclose the deposits made on form T1161.

      Note that there is a 25% withholding tax on the gross monthly rents collected from your tenant. You can reduce this tax by filing form NR6. You should also file a Non Resident Rental Return (Section 216) annually.

  109. Greg says:


    Very impressive comments and answers section!

    We inherited our fathers house after he died in February 2013. It’s taking us a while to settle other aspects of the estate so we are just getting around to selling the house. We expect capital gains.
    1/ Does Dad’s Principle Residence Exemption (PRE) expire immediately at death or would it cover the entire year of 2013? (just hoping)
    2/ The house needed repairs when Dad died and the appraisers deducted considerable value for repairs to establish the value at death. Normally, I understand we could not add repairs like painting to the ACB because at one time before Dad died the house was properly painted. But at the time of death the house needed painting so could we add painting to the ACB at death?.


    • superAmin says:

      Hi Greg,

      Thanks for your question. The principal residence exemption will apply up to the date of death. Any increase in value from the date of death to the date of sale will apply to the beneficiary of the property.

      Improvements made after the date of death will increase the ACB for the beneficiary of the property, and will reduce the capital gain from sale of the property by the beneficiary.

  110. Paul Graham says:

    Can the lifetime Capital Gains Exemption be applied to the profit on the sale by a sole proprietor of a rental property

  111. Kathy Oakley says:

    My son just bought his first house out of real estate can he claim the legal fees he paid to purchase the house?

    • superAmin says:

      Hi kathy,

      He cannot claim legal fees paid on the purchase of this house, but he can claim the First Time Home-Buyer’s Tax Credit for $5,000 if this is his first real estate purchase.

  112. JP says:

    Hi Allan,

    Great article, which I am glad google led me too it. I have a question I hope you can answer and again thank you for such informative responses to previous askers.

    Anyway, a piece of land was purchased about 10 years ago (for 290K) with intent to build a commercial office building on the site. Anyway, not being able to acquire the necessary permits at the time to build on it, the land remained vacant for the 10 years. In the meantime another opportunity came available and a building was purchased 3 years ago instead ( this building required extensive renovations and presently has a 500k mortgage on it). The vacant land was recently sold for 900K a 610K profit so to speak.

    My question is any suggestions to what can be done to limit the tax consequences of the capital gains? I was hoping that I would be able to put a substantial (300K) payment on the mortgage of my present building, but not sure if that is permitted or if there is another way to lessen the taxes.


    • superAmin says:

      Hi JP,

      Your options are very limited. When the property was initially purchased it should have been acquired through a Family Trust or Canadian Corporation in order to split the capital gains realized upon sale among family members. I suggest that you claim all selling costs, including legal fees, accounting fees, real estate commissions, and costs incurred to make the land ready for sale. Also consider making a RRSP contribution to lessen the tax hit.

  113. Sima says:

    Hi Madan,

    I needed to know if I have to pay Hst, on the sale of my commercial property, which I am making a huge loss. And selling it at half the my purchase price.
    It is registered in my corporate and I paid no Hst on the time of purchase.
    Thank you


    • superAmin says:

      Hi Sima,

      You have to collect HST from the purchaser on the sales price. If both you and the buyer are HST registrants, you can complete an election so that the seller (you) does not have to collect HST on the sales price from the buyer.

  114. Stan Egerton says:

    If i purchase a house renovate it and flip it and make $30000 net when sold if i claim it as a business what would the taxes be on that?



    • superAmin says:

      Hi Stan,
      Income from flips is classified as active business income and is fully taxable to you, unlike a capital gain which is only 50% taxable. In your example, $30,000 will be added to your income. If you have no other source of income during the year, then you would pay $6,700 in taxes, which includes CPP premiums payable on self employment earnings.

  115. Spring says:

    Hi Allan,
    Thank you very much for your valuable information.
    We bought a new condo as our rental property. We include rental income when we file our personal income tax. But if we let my son live there as his principal resident after we finish renting for several years, any capital gain? (Is it changing purpose so that it is deemed disposition)
    If my son rents from us with lower rental fee, no any capital gain? (for no deemed disposition) or if the rental fee is fair?
    Thank you very much.

    • superAmin says:

      Hi Spring,
      If you let your son live in the property without paying rent, then the property will change its status from a rental property to a personal-use property, causing a deemed disposition of the property for its market value at the time he moves in. This can trigger a capital gain.

      You can charge below market value rents to your son, but then you cannot claim a rental loss. I suggest that you rent the property to your son based on market value rates.

  116. kevin says:

    Hi Allan:

    Thank you so much to provide so much info on rental property issues. Since CCA is so complicated and will be reclaimed back by CRA, I did not claim any CCA for last few years. But will CRA gives you trouble if you deduct “appliance, garage door open, central vacuum, blinds…” at the time when you sell your rental house? Is there any expiry date on how long you can keep the receipts vailid?

    Also, for commission paid to real estate agent when renting the house, under which line do I enter in rental statement form ? There is no “commission” under the Expenses. Should I enter it under “Legal, accounting, and other professional fees” or add a line named “commission” by myself in tax returm form?

    Thank you for your help.


    • superAmin says:

      Hi Kevin,

      Thanks for your questions. You can claim CCA on appliances, and furniture & fixtures without claiming CCA on the house (excluding land). This will not create a problem.
      Do not throw away your receipts. You should keep them for at least 10 years.
      Enter commissions paid as an other expense on form T776.

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