To claim capital cost allowance (CCA) or not claim to CCA is one of the perennial questions we receive as real estate accountants. Aside from the debate about whether or not to claim CCA, some specific rules exist about when you can and can’t claim it. (For details on CCA itself, see Claiming capital cost allowance on the CRA web site.)
One of the big rules is whether you can claim CCA to create a loss. Normally, personal rental property owners are prevented from creating losses with CCA claims.
Last year, the Tax Court of Canada made a ruling on this as it pertained to a taxpayer who was renting out a chalet to tourists (McInnes vs H.M.Q., 2012-48122(IT)I). The taxpayer argued that the rental income was from a “business” and not from a “rental property”, so he should be allowed to create a loss with CCA.
But, the Court found that, unless a significant range of services are provided in addition to rent, the rental income is considered income from a property. Therefore no tax loss can be created with a CCA claim.
If in doubt about what you should be doing with CCA, please contact your advisor to ensure that you are staying onside and using CCA in the most efficient manner.
George E. Dube, CPA, CA
Real estate accountant, real estate investor, speaker, author