sale of rental house
QUESTION:
Hi there, I am thinking of selling a rental property (in BC) and wish to be more educated on tax implications. The property was bought in 1989 as a principal residence and remained a principal residence until 1995. In 1995 I went to university and I rented out the house-I never moved back and rented it until now. In the mean time I bought another house in 2002 and used it as my primary residence until 2005 and sold it (paid no tax). I have been renting since then. How can I minimize the tax payable for the sale of my rental house? (bought for 80k sell for 250k+-)
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david ingram replies:
When you rented the house out in 1995, you should have filed the following declaration with the rental statement:
"I hereby elect to treat the property at 111 Any Street
Any Town, BC
as my principal residence even though I do not ordinarily live in it."
Although you should have filed this with the tax return,I HAVE NEVER SEEN (TO THIS POINT ANYWAY) THE CRA TURN DOWN A LATE FILED ELECTION if you did not depreciate or claim CCA (capital cost allowance) on teh building. If you claimed CCA, you will owe capital gains tax on the increase in value from 1995 to today. If you did not depreciatre or claim CCA, yo get an extra 5 years.
In either case, you have to fill in CRA form T2091 to calculate the taxable amount.
Find the form at http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind/t2091-ind-04e.pdf
Find the worksheet for the form at http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind_-ws/t2091-ind-ws-05e.pdf
Hi there, I am thinking of selling a rental property (in BC) and wish to be more educated on tax implications. The property was bought in 1989 as a principal residence and remained a principal residence until 1995. In 1995 I went to university and I rented out the house-I never moved back and rented it until now. In the mean time I bought another house in 2002 and used it as my primary residence until 2005 and sold it (paid no tax). I have been renting since then. How can I minimize the tax payable for the sale of my rental house? (bought for 80k sell for 250k+-)
--------------------------------------------------------------------------------
david ingram replies:
When you rented the house out in 1995, you should have filed the following declaration with the rental statement:
"I hereby elect to treat the property at 111 Any Street
Any Town, BC
as my principal residence even though I do not ordinarily live in it."
Although you should have filed this with the tax return,I HAVE NEVER SEEN (TO THIS POINT ANYWAY) THE CRA TURN DOWN A LATE FILED ELECTION if you did not depreciate or claim CCA (capital cost allowance) on teh building. If you claimed CCA, you will owe capital gains tax on the increase in value from 1995 to today. If you did not depreciatre or claim CCA, yo get an extra 5 years.
In either case, you have to fill in CRA form T2091 to calculate the taxable amount.
Find the form at http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind/t2091-ind-04e.pdf
Find the worksheet for the form at http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind_-ws/t2091-ind-ws-05e.pdf
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