It is important to know the dos and don’ts of income property renovations. You cannot maximize the return on your investment property without considering taxes. That is why, in preparation for tax season, we are giving you our tips on how to claim the costs of your income property renovation.  

Our top tips on how to claim the costs of your income property renovation

1. Know what you can claim

When it comes to taxes, it is important to know what you are able to claim. One of the main categories you can use to claim the costs of your income property renovations is capital expenses.

What are capital expenses?

According to the Canada Revenue Agency, they are “renovations and repairs that extend the useful life of your property or improve it beyond its original condition”.

For example, if you purchased a rental property, then decide to upgrade the bathroom plumbing, the costs of that enhancement would count as capital expenses. The best thing about capital expenses is that they can also be deducted over several years.

2. Know what you cannot claim

As important is it is to know what you can claim, you need to also know what you cannot.

The biggest thing to soft costs, such as property tax, legal and accounting fees and interest on loans. By knowing up front that you cannot claim these costs, you will be aware to limit spending in these areas as much as possible.

3. Keep records

There is nothing worse than coming to tax time and realizing that you do not have the records to back up your claims. That is why we suggest having a separate folder or box where you keep receipts related to your income property renovations. That way, when tax season rolls around, you know where everything is – and are able to maximize your claims.

The most important tax tip when it comes to claiming the costs of your income property renovation: Hire a professional 

Claiming the costs of your income property renovation can be an intricate process. That is why it is important to consult with a professional accountant, who will be able to help you claim all the costs you are entitled to. While there is a cost to hiring such a professional, in the end, it may be more than offset by the claims they find for you.

Ready to get started on your income property renovation? Drop us a line to get started on making the most out of your income property.