Real Estate

CCA Q: Is initial landscaping costs a capital cost or expense?

  • Last Updated:
  • May 11th, 2020 9:15 pm
[OP]
Newbie
May 3, 2018
17 posts
10 upvotes

CCA Q: Is initial landscaping costs a capital cost or expense?

I bought a brand new home about 6 years ago and have been renting it out. I am now considering selling it and trying to get my head around the tax implications. I understand the concept of capital costs vs expenses: Capital costs have long term value and expenses are costs of maintaining that value. I think that the initial landscaping (leveling, dirt, grass, retaining walls, fence, patio, etc) meet the long term value definition better than the expense. But I keep reading that landscaping is not a capital cost. Can someone clarify whether the initial landscaping cost belongs to the expense category or the capital cost category? If its an expense, can it be carried forward?
5 replies
Deal Fanatic
Jul 3, 2011
5776 posts
2939 upvotes
Thornhill
I'd tend to agree that those initial costs are capital expenses as they are intended to add value, are improvements rather than repairs or maintenance .

Ask a qualified accountant.
Sr. Member
May 23, 2006
944 posts
116 upvotes
Vancouver
For some expenditures, the line between the two is grey.

For example, $1k cost, which is relatively small, some accountants would take the position to simply deduct it as an expenditure rather than capitalize and depreciate it.
Member
Mar 26, 2012
371 posts
228 upvotes
If your initial landscaping expense is small (say a few hundred $), expense it. I doubt that CRA will go after you for expensing it if you paid a few hundred $ for landscape stones that have long life expectancy beyond the first tax year.

But, if a few thousand $, capitalise it. More importantly, a payment is capital in nature if it has future service potential to earn future (rental) income beyond the current fiscal (tax) year, that is an important accounting (and sometimes tax) matching principle.
Member
May 12, 2003
371 posts
235 upvotes
GTA
If you are replacing with something similar: expense it in the year

If you are adding/replacing with something new and improved: capital expense
[OP]
Newbie
May 3, 2018
17 posts
10 upvotes
Thanks all. Adding it to capital cost is what made sense to me (its $12,000). I just started to second guess myself after reading a little to much.

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