Personal Finance

Rental Income - Current vs Capital

  • Last Updated:
  • Mar 16th, 2022 11:43 pm
[OP]
Newbie
Mar 11, 2022
6 posts
1 upvote

Rental Income - Current vs Capital

I have a question whether any of the following expenses can be claimed as current?

We have purchased a town home last year as a rental unit and

- Have to replace the old stained and unrepeatable carpet on the top floor + stairs with basic laminate flooring. Same cost as if we would to put a new carpet - so I do not consider it as an improvement. Material only as I installed it myself. ~ $2.3K

- Outside AC unit (12 years old) and responsibility of each owner (not strata) has appeared to be broken and we figured that out after we got the possession. Repair man said it has to be replaced as it leaved it's life. We put a new one absolutely the same performance and size. ~$3.9K

- Replaced 2 broken faucets with similar models. ~ $370

Tenant moved ir right after the repairs have been completed.

If all or any of the above are capital and if yes - what class # are they?

Thanks a lot!
7 replies
Sr. Member
May 29, 2012
605 posts
249 upvotes
Southern Ontario
I'm not an accountant but I asked a similar question to mine once about this.

What he told me is that if I'm replacing something that was already there I could call it repairs and write off as expense for that year.

If I was adding something new then I should capitalize it.
This may not be 100% by the book but was a good simple rule.

So I would would say all those items are 100% expense , nothing to capitalize, that's what I would do anyways
Deal Addict
Feb 22, 2007
2040 posts
276 upvotes
Mississauga
Keep it simple - 100% expense
Member
Aug 23, 2021
245 posts
242 upvotes
pardnme wrote: Keep it simple - 100% expense
The following is an extract from CRA commentary https://www.canada.ca/en/revenue-agency ... enses.html
Is the expense for repairs made to used property you acquired to put it in a suitable condition for use? The cost of repairing used property you acquired to put it in a suitable condition for use in your business is considered a capital expense even though in other circumstances it would be treated as a current operating expense. Where the repairs were for ordinary maintenance of a property you already had in your business, the expense is usually current.
Member
Mar 26, 2012
461 posts
361 upvotes
They are capital expenditures, and not expense, when you need to fix your newly acquired rental property, so that it is livable or rentable. That is, it is as if you pay extra to acquire that rental property. Besides, the 3.9k air conditioner replacement is too big an amount and needs to be capitalised, as it should have another 12+ years life.
[OP]
Newbie
Mar 11, 2022
6 posts
1 upvote
ok thank you guys! Is there a guide where I can read about different classes and understand amortization period for faucets, AC, flooring?
Member
Jun 16, 2016
433 posts
466 upvotes
ottawa
I believe it's class 8 for CCA purpose if you really wanna do that.

To make it simple, I think it won't go wrong if you expense all these cost- they are simply replacement with same functionality without significant improvement to house value.
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