Any reason NOT to claim CCA if in max tax bracket?

Leveraging, renting vs owning, making an investment or buying a home?
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HoTiCE
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Any reason NOT to claim CCA if in max tax bracket?

Post by HoTiCE »

Hi,
Assuming one is in the highest tax bracket, I'm wondering if there's any reason NOT to claim the Capital Cost Allowance (CCA) on the building portion of an investment property? I've never done it so far but this year go me thinking for next tax season next month.

As far as I can tell, any recapture being done when I sell can't be worse then now (unless income tax rates increase of course) as I am already at the top bracket. I am also beating inflation since assuming I save 50k within next 10 years, it is worth much more today than in 10 years. I could also use this money to further leverage it and buy additional properties.

Is my reasoning correct?
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kcowan
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Re: Any reason NOT to claim CCA if in max tax bracket?

Post by kcowan »

Yes it is all about the tax brackets. When you are starting out, claiming a deduction is lower leverage until you reach the higher tax bracket. Otherwise it is just tax deferral.
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izzy
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Re: Any reason NOT to claim CCA if in max tax bracket?

Post by izzy »

One reason may be if you anticipate the possibility of using the revenue property as a future residence e.g.on retirement.If you claimed CCA not only do you have recapture but you have capital gains tax to pay on change of use.If you don't claim CCA you can "elect for no change of use" thus deferring the capital gain until death, emigration or sale.It's a judgement call!
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HoTiCE
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Re: Any reason NOT to claim CCA if in max tax bracket?

Post by HoTiCE »

izzy wrote:One reason may be if you anticipate the possibility of using the revenue property as a future residence e.g.on retirement.If you claimed CCA not only do you have recapture but you have capital gains tax to pay on change of use.If you don't claim CCA you can "elect for no change of use" thus deferring the capital gain until death, emigration or sale.It's a judgement call!
Thanks for all the insight. We will never use this as principal residence, purely investment property that I will sell or re-leverage to buy bigger one throughout the years
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