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Capital gains - Canada?

Capital gains - Canada?

Old Jan 10th 2010, 1:34 pm
  #1  
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Default Capital gains - Canada?

I was wondering if anyone had rented out their homes in Canada and what they had experienced. If our home doesn't sell we'd like to rent it out but I am concerned with the tax implications on a second residence and being out of the country.
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Old Jan 10th 2010, 2:01 pm
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Default Re: Capital gains - Canada?

Originally Posted by lilybilly101 View Post
I was wondering if anyone had rented out their homes in Canada and what they had experienced. If our home doesn't sell we'd like to rent it out but I am concerned with the tax implications on a second residence and being out of the country.
The only tax implications I'm aware of is having to file Canadian Tax returns as you will have Canadian income and the resultant expense writeoffs on the rental property. If you buy and live in another property while owning the Canadian property then Capital Gains tax will/may be payable if/when you sell the Canadian one.
Perhaps an accountant will come along to confirm this or provide a better reply.
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Old Jan 10th 2010, 8:11 pm
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Default Re: Capital gains - Canada?

Originally Posted by lilybilly101 View Post
I was wondering if anyone had rented out their homes in Canada and what they had experienced. If our home doesn't sell we'd like to rent it out but I am concerned with the tax implications on a second residence and being out of the country.
If you are leaving Canada and don't sell you house before you leave the consequences could be financially dire. Talk to an accountant before making a decision. Once you have left the country it's too late. How many homes you own does not matter, even if you only owned one and lived in rented in the UK, a home has to be your principal residence to qualify as exempt.

The deemed disposition rules and departure tax rules may apply.

http://www.cra-arc.gc.ca/tx/nnrsdnts.../lvng-eng.html
http://www.cra-arc.gc.ca/E/pbg/tf/nr73/nr73-08e.pdf
http://www.bayshorebank.com/pdfs/res...leaving_canada
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Old Jan 10th 2010, 10:23 pm
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Default Re: Capital gains - Canada?

Originally Posted by lilybilly101 View Post
I was wondering if anyone had rented out their homes in Canada and what they had experienced. If our home doesn't sell we'd like to rent it out but I am concerned with the tax implications on a second residence and being out of the country.
There was a thread on this subject about six months ago which you may wish to look up. It was concluded, as Aviator says, that, if you are not a Canadian resident at the time of sale, then you will be liable for capital gains tax on any home you sell, even if it is your principle residence. I believe however, the tax can be recovered on your principle residence so you may wish to seek professional advice on this matter.

Is it not possible to sell? I thought the real estate market is quite active in your area?
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Old Jan 10th 2010, 11:46 pm
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Default Re: Capital gains - Canada?

Originally Posted by johnh009 View Post
There was a thread on this subject about six months ago which you may wish to look up. It was concluded, as Aviator says, that, if you are not a Canadian resident at the time of sale, then you will be liable for capital gains tax on any home you sell, even if it is your principle residence. I believe however, the tax can be recovered on your principle residence so you may wish to seek professional advice on this matter.
Thing is, if you are not resident in Canada it cannot be your principle residence, as you are not living in it.
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Old Jan 11th 2010, 1:59 am
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Default Re: Capital gains - Canada?

Originally Posted by johnh009 View Post
if you are not a Canadian resident at the time of sale, then you will be liable for capital gains tax on any home you sell, even if it is your principle residence.

.... if you have made some gains. How long have you been here and has your house increased in price? I know ours would be worth less than when we bought (at the height of the market) in 2007. It might be worth flogging it for $10,000 less than you paid, just have piece of mind!!

It might also be worth getting a valuation just before you leave these shores. I'm sure someone, somewhere, would ask whether the property value has increased since you left (I know the reverse is true in the UK if you move away and leave a UK house rented out for example, then sell it a couple of years down the line - you need to have got a valuation at the time you left).

I think one of the issues is that if the property is sold once you have left Canada, the tax man can withhold 25% of the value of the gains, until you have filed your tax return the next year and they have worked out you have paid all that you may owe. Therefore, you may still get this money back after a long while, but don't have to rely on it when you first move.....

Unless you are likely to be losing many, many tens of thousands of dollars, or you think you might ping-pong back here again - seriously consider getting shot of the place before you board the flight back to the UK....
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Old Jan 11th 2010, 2:22 pm
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Default Re: Capital gains - Canada?

Originally Posted by The Aviator View Post
Thing is, if you are not resident in Canada it cannot be your principle residence, as you are not living in it.
True, but you are taxed on gains on any property owned if you are not a resident (see "Selling Property in Canada" in the link). It does state, the tax can be recovered.

http://www.assignmentscanada.ca/buyingincanada.html

Last edited by johnh009; Jan 11th 2010 at 2:28 pm.
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Old Jan 11th 2010, 3:16 pm
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Default Re: Capital gains - Canada?

Originally Posted by johnh009 View Post
True, but you are taxed on gains on any property owned if you are not a resident (see "Selling Property in Canada" in the link). It does state, the tax can be recovered.

http://www.assignmentscanada.ca/buyingincanada.html
I would be more inclined to use the CRA website as a reference for Canadian tax. You are actually taxed on the gain on any property you sell even if you live in Canada other than your principle residence. To claim it as your principle residence you have to be living there.
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Old Jan 11th 2010, 4:12 pm
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Default Re: Capital gains - Canada?

Originally Posted by johnh009 View Post
There was a thread on this subject about six months ago which you may wish to look up. It was concluded, as Aviator says, that, if you are not a Canadian resident at the time of sale, then you will be liable for capital gains tax on any home you sell, even if it is your principle residence. I believe however, the tax can be recovered on your principle residence so you may wish to seek professional advice on this matter.

Is it not possible to sell? I thought the real estate market is quite active in your area?
I guess it's just a stand by. We bought at the height of the market and we've put in a few thousand since so we want to make our money back at a minimum. In terms of the area, it is still and I think always will be desirable especially with retirees so fingers crossed we'll find a buyer. I need to fully commit to a contract in September so I wanted a back up plan. I'd go to the UK on my own for a while (and hubby could continue with house sale stuff) but we're having a baby in March and we have a three year old so it's not really possible.......although they all sound like good reasons to run across the pond for some peace!

I'll check out all the info you guys have given me but we will endeavour to sell up before we go to avoid a tax mare.

Last edited by lilybilly101; Jan 11th 2010 at 4:18 pm.
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Old Jan 11th 2010, 4:20 pm
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Default Re: Capital gains - Canada?

Originally Posted by ann m View Post
.... if you have made some gains. How long have you been here and has your house increased in price? I know ours would be worth less than when we bought (at the height of the market) in 2007. It might be worth flogging it for $10,000 less than you paid, just have piece of mind!!

It might also be worth getting a valuation just before you leave these shores. I'm sure someone, somewhere, would ask whether the property value has increased since you left (I know the reverse is true in the UK if you move away and leave a UK house rented out for example, then sell it a couple of years down the line - you need to have got a valuation at the time you left).

I think one of the issues is that if the property is sold once you have left Canada, the tax man can withhold 25% of the value of the gains, until you have filed your tax return the next year and they have worked out you have paid all that you may owe. Therefore, you may still get this money back after a long while, but don't have to rely on it when you first move.....

Unless you are likely to be losing many, many tens of thousands of dollars, or you think you might ping-pong back here again - seriously consider getting shot of the place before you board the flight back to the UK....
I had a property manager tell me the government took 25% of the rental each month and once sold they would take 25% of the gain on the property and you're right, I believe you THEN claim it back. Sounds complex but I'll check this through today. Thank you.....
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Old Jan 11th 2010, 8:50 pm
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Default Re: Capital gains - Canada?

Originally Posted by lilybilly101 View Post
I guess it's just a stand by. We bought at the height of the market and we've put in a few thousand since so we want to make our money back at a minimum. In terms of the area, it is still and I think always will be desirable especially with retirees so fingers crossed we'll find a buyer. I need to fully commit to a contract in September so I wanted a back up plan. I'd go to the UK on my own for a while (and hubby could continue with house sale stuff) but we're having a baby in March and we have a three year old so it's not really possible.......although they all sound like good reasons to run across the pond for some peace!

I'll check out all the info you guys have given me but we will endeavour to sell up before we go to avoid a tax mare.
Here is a link for the conditions of establishing non-resident status:

http://www.cra-arc.gc.ca/tx/nnrsdnts.../nnrs-eng.html
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