Sounds complicated as to deduct HELOC interest you need to invest in an income-generating investment, but the condo won't be generating any income for you for many years. I'm curious of the answer as well.
If you attempted this, there could be all sorts of problems if plans changed and when condo was finally completed it was not rented out but actually sold, or decided to move in as a principal residence. Would need to re-assess multiple previous tax years and subject to interest owed or penalties on deductions that shouldn't have been done in the first place.
Why would you need to reassess? The law is clear: the taxpayer needs to have "reasonable expectation of income at the time the investment was made". If the taxpayer has met this burden, which is a matter of facts and circumstances at the time of the investment, then life is good. No?rob444 wrote: ↑ If you attempted this, there could be all sorts of problems if plans changed and when condo was finally completed it was not rented out but actually sold, or decided to move in as a principal residence. Would need to re-assess multiple previous tax years and subject to interest owed or penalties on deductions that shouldn't have been done in the first place.
Sure - that's an approach to take and generally speaking what folks would advise. I spoke to a colleague and that was his first thought: "these are soft costs that are capital". I personally disagree and if it was me, I'd take a filing position that says something like this:
We are just guessing. Ultimately it comes down to how the CRA would view this in a potential audit.ahlaker wrote: ↑ Why would you need to reassess? The law is clear: the taxpayer needs to have "reasonable expectation of income at the time the investment was made". If the taxpayer has met this burden, which is a matter of facts and circumstances at the time of the investment, then life is good. No?
I'm planning to sell a condo that I bought pre-con in 2016. I need to plan well ahead to reduce the capital gain tax. This would be ideal for my situation if the interest on the pre-con deposit taken from HELOC can be used to add to the cost of purchasing. I'm wondering what document should I retain? I only have proof that the cheques for paying the deposit were taken from a HELOC account, and my HELOC balance was always higher than the pre-con deposit amount (never paid off, but had a few portions going back and forth from revolving to fixed). I originally planned to add some interest to the closing cost as well but realized the money was taken out from a chequing account, so I guess it won't be eligible right?
Speak to accountant.pandorazw wrote: ↑ I'm planning to sell a condo that I bought pre-con in 2016. I need to plan well ahead to reduce the capital gain tax. This would be ideal for my situation if the interest on the pre-con deposit taken from HELOC can be used to add to the cost of purchasing. I'm wondering what document should I retain? I only have proof that the cheques for paying the deposit were taken from a HELOC account, and my HELOC balance was always higher than the pre-con deposit amount (never paid off, but had a few portions going back and forth from revolving to fixed). I originally planned to add some interest to the closing cost as well but realized the money was taken out from a chequing account, so I guess it won't be eligible right?
I agree. It's very hard to separate the interest I guess I would have to give an reasonable estimation.
Speak to an accountant as CRA may deem that you are flipping the condo and you would not be eligible to claim capital gains. Claiming capital gains is a major error that many tax payers make when selling properties.pandorazw wrote: ↑ I'm planning to sell a condo that I bought pre-con in 2016. I need to plan well ahead to reduce the capital gain tax. This would be ideal for my situation if the interest on the pre-con deposit taken from HELOC can be used to add to the cost of purchasing. I'm wondering what document should I retain? I only have proof that the cheques for paying the deposit were taken from a HELOC account, and my HELOC balance was always higher than the pre-con deposit amount (never paid off, but had a few portions going back and forth from revolving to fixed). I originally planned to add some interest to the closing cost as well but realized the money was taken out from a chequing account, so I guess it won't be eligible right?
I have already spoken to an accountant but was never mentioned such caution. It's an income generating property which I paid tax on any positive cash flow.
