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Investor Insight: tax 101 for basement units

Converting an empty basement into a cash-generating apartment isn't as simple as putting in a separate exit. Chris Potter, a partner in the Toronto North Tax Practice of PricewaterhouseCoopers, outlines the tax implications of renting out a unit in your primary residence, and, yes, there are some..

Video transcript below:

Chris Potter – Price Waterhouse Coopers
Chris Potter: The tax implications of renting a room in your house for most people are actually going to be straightforward as long as you are not converting your whole part, your whole house or the major part of your home for rental purposes. You won’t have to worry about the indispositions. Most people should be able to just take a reasonable portions of expenditures usually based on the relative square footage of the area being rented.

You will not be able to take cost related to renovations or other capital expenditures and in order to make sure that things work properly, you should not be claiming capital cost allowance but you can claim direct expenses and portions of other expenses like interest, property taxes, advertising and other direct costs.

Most of the factors to consider as to whether it is a net benefit has really nothing to do with tax. But from a tax and income perspective, I think one of the things that you should keep in mind is that you will be able to claim a portion of expenses that arguably you would otherwise incurred, interest on your home, your mortgage interest, property taxes and the like. So, you really have to weigh what incremental cost you are going to incur relative to the additional income and cash that you are going to receive on the rental.


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