depreciation of US rental property while residing in Canada
Moderator: Mark T Serbinski CA CPA
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depreciation of US rental property while residing in Canada
I have a rental property in California and am filing both US and Canadian returns this year since i'm now residing in Canada.
I am depreciating the rental property on my US return which works out fine and makes sense to me. Since I earned rental income during the time I was residing in Canada during the year I have to declare the rental property on my Canadian return. I have read that I can depreciate the property or not. Its optional.
Two questions:
1) I have been unable to figure out how to depreciate the property in the same way with the same capital costs, etc... because the Canadian return doesn't seem to have a spot for improvements such as landscaping/flooring, etc... that was clearly on the US return. Am I missing something? Are improvements not an allowable CCA class?
2) I read in multiple places that it is not advisable to depreciate the property on my canadian return because when i sell the house I will have to pay that back to the CRA. BUT, I am not planning on selling the house for many years and I plan on returning to the US to live in the house in a few years from now onwards.... So If I sell the house in let's say 20 years when i'm not even filing Canadian tax returns anymore, how would CRA reach back and take back the CCA claim? Or is it handled when I do my departure return from Canada and the whole deemed disposition thing occurs??
And if I don't depreciate I am going to owe a pretty good sum of money to CRA on this... trying to avoid it somehow.
Very confusing.... Any help is MUCH appreciated.
I am depreciating the rental property on my US return which works out fine and makes sense to me. Since I earned rental income during the time I was residing in Canada during the year I have to declare the rental property on my Canadian return. I have read that I can depreciate the property or not. Its optional.
Two questions:
1) I have been unable to figure out how to depreciate the property in the same way with the same capital costs, etc... because the Canadian return doesn't seem to have a spot for improvements such as landscaping/flooring, etc... that was clearly on the US return. Am I missing something? Are improvements not an allowable CCA class?
2) I read in multiple places that it is not advisable to depreciate the property on my canadian return because when i sell the house I will have to pay that back to the CRA. BUT, I am not planning on selling the house for many years and I plan on returning to the US to live in the house in a few years from now onwards.... So If I sell the house in let's say 20 years when i'm not even filing Canadian tax returns anymore, how would CRA reach back and take back the CCA claim? Or is it handled when I do my departure return from Canada and the whole deemed disposition thing occurs??
And if I don't depreciate I am going to owe a pretty good sum of money to CRA on this... trying to avoid it somehow.
Very confusing.... Any help is MUCH appreciated.
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- Posts: 143
- Joined: Wed Jul 29, 2009 8:30 am
You will pay a departure tax in Canad on everything you own when you leave.
Since you MUST depreciate in US, you SHOULD in Canada as well. This will balance out better when you leave.
Remember taht your cost basis in canada is based on arrival in Canada value.
Since you MUST depreciate in US, you SHOULD in Canada as well. This will balance out better when you leave.
Remember taht your cost basis in canada is based on arrival in Canada value.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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- Posts: 143
- Joined: Wed Jul 29, 2009 8:30 am
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- Posts: 143
- Joined: Wed Jul 29, 2009 8:30 am
[quote="nelsona"]You will pay a departure tax in Canad on everything you own when you leave.
Since you MUST depreciate in US, you SHOULD in Canada as well. This will balance out better when you leave.
Remember taht your cost basis in canada is based on arrival in Canada value.[/quote]
Can I use my current property tax bill to figure that cost basis? it shows the breakdown of land/buildings which is helpful since i can't depreciate the land on the canada return...
or should i use an online property appraisal tool like zillow.com?
Since you MUST depreciate in US, you SHOULD in Canada as well. This will balance out better when you leave.
Remember taht your cost basis in canada is based on arrival in Canada value.[/quote]
Can I use my current property tax bill to figure that cost basis? it shows the breakdown of land/buildings which is helpful since i can't depreciate the land on the canada return...
or should i use an online property appraisal tool like zillow.com?
I don't see how they will match since they have different rules, and are based on different cost basis.
You will need to become a renatl income expert so I suggest reding all you can about reantal income and CCA on the CRA website.
You will need to become a renatl income expert so I suggest reding all you can about reantal income and CCA on the CRA website.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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- Joined: Wed Jul 29, 2009 8:30 am
As to improvements that you make, if they were made before you came to canada, of course they are included in the new FMV you establish upon arrival.
If you make improvements while a Cdn resident, they are considered adjustments to cost basis, and are reflected on your CCA calculations. The rules as to what is considered an improvement or a maintenance item may vary between US and canada.
If you make improvements while a Cdn resident, they are considered adjustments to cost basis, and are reflected on your CCA calculations. The rules as to what is considered an improvement or a maintenance item may vary between US and canada.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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- Joined: Wed Jul 29, 2009 8:30 am
That's great thanks. That actually makes it easier for me. Its kind of a wash anyways since my FMV is pretty subjective... My property tax assessment is 20,000 OVER what Zillow.com says... And my improvements are in the ~16,000 range... so... I'm thinking of just using my property tax assessment anyways and just consider it all baked in to that value. Do you think that will be acceptable to CRA if they ever review my methodology?
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