Personal Finance

Claim Property Taxes on Rental Property as Expense in 2018 or 2019?

  • Last Updated:
  • Apr 24th, 2019 3:04 am
[OP]
Deal Fanatic
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Apr 1, 2001
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Claim Property Taxes on Rental Property as Expense in 2018 or 2019?

In our city, we received the property tax notice in November 2018. The due date was Feb 4 2019. The bill was paid in Dec 2018.

CRA's guide on Rental Income states:

Current expenses are recurring expenses that provide a short-term benefit. For example, a current expense is the cost of repairs you make to keep a rental property in the same condition as it was when you acquired it. You can deduct current expenses from your gross rental income in the year you incur them.



For the purposes of deciding whether to deduct this property tax bill in 2018 or 2019 - does this mean I should be deducting this bill in 2018 since it was paid in Dec 2018? (Even though the due date is Feb 2019).
7 replies
Member
Jul 26, 2015
205 posts
124 upvotes
Vancouver, BC
Arrow wrote:
Apr 22nd, 2019 1:36 am
In our city, we received the property tax notice in November 2018. The due date was Feb 4 2019. The bill was paid in Dec 2018.

CRA's guide on Rental Income states:

Current expenses are recurring expenses that provide a short-term benefit. For example, a current expense is the cost of repairs you make to keep a rental property in the same condition as it was when you acquired it. You can deduct current expenses from your gross rental income in the year you incur them.



For the purposes of deciding whether to deduct this property tax bill in 2018 or 2019 - does this mean I should be deducting this bill in 2018 since it was paid in Dec 2018? (Even though the due date is Feb 2019).
Yes. Paid in 2018 - deduct in 2018.
Jr. Member
May 4, 2007
133 posts
21 upvotes
Is there any significance in the use of the word "incur", rather than "pay"

If I have work done and receive the invoice in 2018 but only pay it in 2019, when was the expense incurred. I would have thought 2018.

So what date is important. Date work is done, invoice date, payment date? Or does it not really matter as long as you are consistent
Deal Fanatic
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Dec 27, 2009
6866 posts
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Ottawa, ON
itIsI wrote:
Apr 22nd, 2019 9:04 pm
Is there any significance in the use of the word "incur", rather than "pay"

If I have work done and receive the invoice in 2018 but only pay it in 2019, when was the expense incurred. I would have thought 2018.

So what date is important. Date work is done, invoice date, payment date? Or does it not really matter as long as you are consistent
Assuming your business uses the accrual method of accounting (most have to use accrual - with a few exceptions such as fishing that can choose), that expense would be for 2018 (the year it was incurred) no matter when you paid it. The invoice date is in 2018 right?
Deal Fanatic
Aug 21, 2007
5188 posts
310 upvotes
Markham
Arrow wrote:
Apr 22nd, 2019 1:36 am
In our city, we received the property tax notice in November 2018. The due date was Feb 4 2019. The bill was paid in Dec 2018.

CRA's guide on Rental Income states:

Current expenses are recurring expenses that provide a short-term benefit. For example, a current expense is the cost of repairs you make to keep a rental property in the same condition as it was when you acquired it. You can deduct current expenses from your gross rental income in the year you incur them.



For the purposes of deciding whether to deduct this property tax bill in 2018 or 2019 - does this mean I should be deducting this bill in 2018 since it was paid in Dec 2018? (Even though the due date is Feb 2019).
im assuming this bill is to cover 2019 property taxes? in which case I would say, include in 2019

put another way, if this is the first year of owning the property (which i assume it is, since its a question now), how much in property taxes have you already paid? and when would did/ are you claiming that. If property taxes are roughly $2,000 annually, and you have paid $3,000 already, it stands to reason that $1,000 is prepaid for the next year, and should be included in 2019
Deal Fanatic
Aug 21, 2007
5188 posts
310 upvotes
Markham
Chickinvic wrote:
Apr 23rd, 2019 2:17 pm
Assuming your business uses the accrual method of accounting (most have to use accrual - with a few exceptions such as fishing that can choose), that expense would be for 2018 (the year it was incurred) no matter when you paid it. The invoice date is in 2018 right?
to clarify, the bill date doesnt necessarily correspond with when an expense is incurred.

if the invoice date is 2018, for a service in 2019, it is being prepaid and is not a current expense
Sr. Member
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Dec 24, 2007
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BC
itIsI wrote:
Apr 22nd, 2019 9:04 pm
Is there any significance in the use of the word "incur", rather than "pay"

If I have work done and receive the invoice in 2018 but only pay it in 2019, when was the expense incurred. I would have thought 2018.

So what date is important. Date work is done, invoice date, payment date? Or does it not really matter as long as you are consistent
"Incur" is when there is a legal obligation to pay. So, if you have work done and the person completed the job but haven't sent you the invoice, you would have incurred the expenses and have a debt owing. The invoice date is irrelevant except for any expected payment date when they might start to charge interest on overdue accounts.

When it is "paid" is when you settle the debt owing.

In answer to the OP question, if this was a notice for the 2019 Property Taxes, the expense has not been incurred in 2018 (even if paid) as there is no legal obligation to pay until Feb 2019 when it is actually due. The notice and any amount paid prior to the 2019 due date is just a prepaid tax installment which is then applied against the 2019 amount due.
[OP]
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Apr 1, 2001
5124 posts
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Thank you for the input everyone!

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