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I own a duplex, and I understand that I can't claim CCA on the house and continue to have the capital gains exemption.

But since I bought a new kitchen, put new flooring in, etc for the rental property can I claim CCA on that and not have the capital gain exemption lost?
 

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iherald, i'm not a tax pro, but I do have experience with rentals. My understanding is that any upgrades like new kitchen etc has to be claimed via the CCA process. Having said that, it shouldn't affect the capital gains exemption when you sell the rental. If you claim CCA on the property structure itself, then you will face a CCA "recapture" when it comes time to sell. Personally, I never claim CCA on the property.

Here's more on how cca works.
 

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I own a building, live in one apartment and rent the other 2. I have added all improvements on the rentals to the rental portion of the CCA over the years. I have never taken the CCA allowance on the rental portion (depreciated the house). Even though it's an old building, it appreciates in value over the years, so when I sell, I will probably be facing a capital gain (lowered by the improvements that have been added).

Whenever I have done a large reno job, I have taken 10% of the total cost as current expenses, the balance going into the CCA account. The reason for this is, even though a contractor does the major work, I do the painting and smaller work. CRA has never questioned this.
 

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My interpretation of CRA T4037 and IT120 would be that if you own a duplex, only a portion of it is eligible for the principal residence exemption in the first place, and that the rental portion is subject to capital gains. But I suspect this is often skirted around, either by non-reporting or by stretching the meaning of s.32 of IT120.

Your principal residence can be any of the following types of housing units:
°Ω a house;
°Ω a cottage;
°Ω a condominium;
°Ω an apartment in an apartment building;
°Ω an apartment in a duplex; or ...


If only a part of your home qualifies as your principal residence and you used the other part to earn or produce income, you have to split the selling price and the adjusted cost base between the part you used for your principal
residence and the part you used for other purposes (for example, rental or business). You can do this by using square metres or the number of rooms, as long as the split is reasonable. Report only the gain on the part you used to produce income. For more information, see “Real estate, depreciable property, and other properties” on page 16 and Interpretation Bulletin IT-120, Principal Residence. Form T2091(IND), Designation of a Property


IT 120:
32. It is our practice not to apply the deemed disposition rule, but rather to consider that the entire property retains its nature as a principal residence, where all of the following conditions are met:
(a) the income-producing use is ancillary to the main use of the property as a residence,
(b) there is no structural change to the property, and
(c) no CCA is claimed on the property.
These conditions can be met, for example, where a taxpayer carries on a business of ..., rents one or more rooms in the home, or ....
 
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