Don’t Forget the Tax Implications When Investing in a Rental Property

The acquisition of a revenue property is often a good way to increase net worth. If you are planning to take on a rental property, be sure to keep the tax implications in mind. Rental properties are often audited. 

Key issues are the deduction of costs you may consider to be maintenance and repairs are fully expensed. However, CRA may consider that those very expenditures should be depreciated on the Capital Cost Allowance schedule. Losses on rentals to family members can also be disallowed when there is no reasonable expectation of profits.

Be sure to discuss these issues in advance with your tax pro, as well as valuation issues if you plan to use a portion of the property as your tax exempt principal residence. Or, take our Tax Strategies for Financial Advisors course, which dedicates a chapter to real estate.