Home improvements are deductible when you convert it to rental

Published on: July 27, 2015 | Last Updated: July 27, 2015 4:10 PM EDT
While non-residents don't need to file a Canadian return if they are withdrawing funds from a Canadian RRSP account, but it can be beneficial to do so.

While non-residents don't need to file a Canadian return if they are withdrawing funds from a Canadian RRSP account, but it can be beneficial to do so. CHRIS YOUNG / THE CANADIAN PRESS

Deductions for an unoccupied house and possible will complications for Americans with assets in Quebec were among the topics raised in the latest batch of reader letters. Here’s what they wanted to know.

Q: “I moved out of my home in June of 2013 and put it up for sale, but there were no takers. This month, I rented it out. During the time it was unoccupied, I installed a new furnace and did some plumbing upgrades, which I submitted in 2013 for environmental rebates. Can I claim these expenses on my 2015 tax return? And can I claim the 2015 property taxes as an expense, or just the portion applicable after July 1?”

A: Mathieu Ouellette, partner at accounting firm Crowe BGK, says you can start claiming expenses from the time you put the house on the rental market, whether it got rented immediately or not, but not for the time you simply had it up for sale before then. The conversion to rental property also must be reported to the tax departments, who will treat it as if the home was sold at that point. The principal-residence exemption should spare you from most capital-gains taxes accrued through 2015 (if you didn’t purchase another home). In instances where the deemed sale of the home still results in a tax liability, it is possible to make an election to mitigate this impact, Ouellette said.

Q: “I’m an American who recently moved back to the U.S., after many years in Canada. I am getting ready to draw up a will here but still have an RRSP and a bank account in Quebec. Do I need a Quebec will as well, for that reason?”


A: No. Notary François Bernier of Mackenzie Investments says that, in most cases, a U.S. executor should be able to assume control of any Quebec assets you have as part of his or her mandate. But your U.S. will likely need to be probated first in the U.S., in accordance with the rules of the jurisdiction in which you were domiciled at the time of death. The size and makeup of the estate also could complicate things, making professional advice a good idea for cross-border estate planning, Bernier said.

Q: “My husband and I are Canadians who moved to New Zealand in 2008 and have not resided in Canada since. Last year, we decided to withdraw the funds remaining in our Canadian RRSPs to purchase a home in New Zealand. At the time of withdrawal, 21 per cent of the funds were withheld for tax. Will we need to file a Canadian tax return for 2014 because of this? Will we get any money back? We declared the RRSP withdrawal as income in New Zealand.”

A: As a non-resident, you don’t need to file a Canadian return for 2014, although it might have been beneficial to do so. You may have been entitled to a refund for some of the RRSP money withheld if you had filed the return and made an election under section 217 of the Income Tax Act. “We will only take your election under Section 217 into account if it is beneficial (to you),” Canada Revenue Agency says on its website. Unfortunately, the deadline for filing a 217 election for the 2014 tax year was June 30. CRA won’t return any money beyond that date, though it may still go after non-residents who underpaid.

The Montreal Gazette invites reader questions on tax, investment and personal-finance matters. If you have a query you’d like addressed, please send it to Paul Delean, Montreal Gazette Business Section, Suite 200, 1010 Ste-Catherine St. W., Montreal, QC, H3B 5L1, or by email topdelean@montrealgazette.com

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