Garry  Sahota

Garry Sahota

Sales Representative

HomeLife Silvercity Realty Inc., Brokerage *

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Investment Properties Common Deductions on Capital Gains - Do You Know Series With Garry Sahota

Flipping Your Investment Property, Read This First

Garry Sahota, M.Eng. , Real Estate Professional

Date : 03 May 2021 | Do You Know Series with Garry Sahota |

Buying an investment property can be really fruitful if executed properly with the guidance of experts. Knowing all the costs beforehand can help you make better decision. In some cases, capital gains tax is inevitable. Know what deductions can be made on capital gains to save some taxes. Following are the most importatnt deductions you can take on your investment property.

 1.    Acquisition costs, legal costs and any other closing costs

Be sure not to miss out on all the deductions such as legal costs, land transfer tax, title insurance and any other closing costs. You should already be aware of what closing costs are typically like in your area since these costs tend to vary from area to area. 

To pick up these expenses, you would have to review the trust ledger.

2.    Carrying cost of the property

This includes property taxes, insurance, mortgage interest, hydro, any utilities, lawn care, etc. Be sure to keep track of these expenses so you can deduct them against your profit.

3.    Material cost, labour and contractor’s fees

Generally speaking, you are allowed to deduct expenses you incur for the purpose of generating the income. Direct material cost, labour and contractor you use are expenses that you can link directly to generate the income. Hence these are all deductible expenses. For example, if you remodelled the bathroom with new plumbing, frameless shower doors, new tiles and a new toilet, those items and the work done to put them all into place are expenses that are deductible. Be sure to keep diligent record of the expenses, make sure they do not fade over time (Home Depot receipts simply fade after 2 years).

4.    Automobile expenses

When you drive your car to the site to do the work, inspect the work, pick up materials, expenses incur on the vehicle are deductible against the income.

You are required to keep diligent record of the mileage you incur to do the work.

5.    Home office expenses

Many flippers or renovators do not have a proper office space to handle the day to day. They often use a portion of their home to manage their business.In that case, you may qualify to claim a portion of your home office expense against the profit to reduce the tax liability.

6.    Advertising

Advertising expense is the same as direct material cost. Any expenses you incur to assist in selling the property are considered deductible. This includes staging cost, cleaning expenses (renovation = mess), printing signs and flyers, advertising costs on local newspaper, kijiji, etc.

7.    Closing cost such as realtor commission fees and legal cost

Closing costs such as realtor commission, legal cost and mortgage termination charge are all deductible against the sale of the property. Be sure to keep track of the expenses to maximize your deduction.

If you need more information or advice, do not hesitate to reach me out. Garry Sahota is expertise in helping you buy investment property whether it is for long term rentals or for flipping. Get connected, Cheers!

GARRY SAHOTA. Real Estate Professional with Homelife Silvercity | Cell: 647-974-4510 |

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