Question 101 - Jordan Bennett - Ask John

Concepts

9.7.2 Rental Income for Investors

Gross rental income is the total amount you receive from renting a property. It includes rent and other amounts paid by tenants that relate to the rental arrangement, such as reimbursements for expenses that would otherwise be the landlord's responsibility.

A current expense is an expenditure that typically provides a benefit in the current period and is incurred to maintain or operate the rental property. You generally deduct current expenses in calculating net rental income for the year.

A capital expenditure is an expenditure that acquires, improves, or extends the useful life of a property or asset. Rather than being deducted immediately, the amount is generally added to the cost of a depreciable asset or the property's capital cost.

Deductible rental expenses may include costs such as mortgage interest, property taxes, insurance, utilities paid by the owner, maintenance, and repairs incurred to earn rental income, subject to applicable tax rules.

Capital cost allowance (CCA) is an optional deduction that allows you to allocate the cost of eligible depreciable property over time for tax purposes. One advantage of claiming CCA is that it can reduce current taxable rental income.

A disadvantage of claiming CCA is that it may result in recapture when the property is disposed of or when proceeds exceed the remaining undepreciated capital cost. In addition, CCA cannot be claimed to create or increase a rental loss.