Non resident tax for real estate

groobi · Post by **groobi** » Sat Jun 25, 2016 4:28 am

Dear all, if I start renting out my only house (principal residence) when I become a non resident and come back to Canada in the future and use that house as my home, what would happen?

- is there a disposition when I start renting it out? But no tax thanks to principal
residence rules?
- How about when I come back and start using it? Is there a disposition again?
If so, can I use principal residence rule in any way for this situation?

Thank you in advance!

nelsona · Post by **nelsona** » Sat Jun 25, 2016 7:04 am

When you returned, there would be the disposition due to change in use, you would get credit for the years it was your PR plus one year in the calculation. You could defer the tax on any gain until selling, but only if you do not CCA. Trouble is, that most US residents (who MUST depreciate renatals) end up using CCA to avoid a tax mismatch.

So, you might not be able to defer tax.

Note that you can't use any of the change of use provisions while non-resident.

groobi · Post by **groobi** » Sat Jun 25, 2016 5:45 pm

nelsona thank you. Do you mean that even if I start renting it out when I leave Canada, it wouldn't be considered as a change in use, so I would carry original cost??

nelsona · Post by **nelsona** » Sat Jun 25, 2016 8:45 pm

Yes. It would be sorted out either when you sell, or when you come back, in your favour. CRA lets you choose at that time. Change of use, since your Cdn property can no longer be your PR anymore when you leave Canada, regardless of what you do with the property, doesn't apply.
So, even though you do not have to make any choice as you leave, it is always a good idea to get a solid FMV evaluation at that time.