Real-Estate. Markets. Investment properties. Rental properties. Mortgages. Interest Rates.
SO many hot topics right now regarding the buying and selling of properties. As accountants, we answer a lot of questions from clients regarding real estate.
One of the most complicated topics is “change in use”- in simplest terms, when you are moving OUT of a property and converting it to a rental, or moving back IN to a property that was previously a rental. There is a combination of reporting requirements, as well as tax implications, that you would want to discuss with your accountant. These “change in use” rules can be quite complex, and it’s important to understand how this will impact you specifically before moving or making any decisions.
According to Canada Revenue Agency:
“When there is a change in use of a property you have, you may be considered to have sold all or part of your property even though you did not actually sell it. The following are some sample situations:
- You change all or part of your principal residence to a rental or business operation.
- You change your rental or business operation to a principal residence.
Every time you change the use of a property, you are considered to have sold the property at its fair market value and to have immediately reacquired the property for the same amount. You have to report the resulting capital gain or loss (in certain situations) in the year the change of use occurs.”
Planning ahead is very important, instead of trying to deal with the repercussions later.
CRA has more information on “Changes in Use” at the link provided here.
Have questions about this, or other accounting, tax, or financial topics, contact us! 604-985-0123 Shannon@Cahillcpa.ca