Real estate: current or capital expenditure?
Did you make major renovations to a rental property in 2021? Be aware that it is important for tax purposes to clearly distinguish current expenses from capital expenses. Briefly, current expenses are fully deductible from rental income in the year they are incurred, while capital expenses are added to the cost of the building and can be amortized over several years thanks to the capital cost allowance ( DPA). Since the Income Tax Act is silent on this subject, the Canada Revenue Agenda (CRA) has given some criteria to follow to determine if it is a capital expenditure or a current expense. Lasting benefit Where the expenditure provides a lasting benefit, it will normally be considered a capital expenditure. Conversely, it will be a current expense if it is recurring and has a short useful life. For example, replacing the wood siding on a building with brick siding would be a capital expense, while the cost to have the wood siding repainted would be a...
