Rental Property Deductions: Current vs. Capital

[Spidey]

I know I should probably talk to an accountant, but I've come to learn that there are some smart folks that like to hang out around here.

We have a conforming basement suite that we rent out and we live upstairs in the main house (our house is zoned R1B).

Last year we had a plumber come in and replace a failed expansion tank and do a couple other repairs to our boiler unit that provides hot water and radiant in-floor heat to the rental suite. The cost was around $800, so I'm assuming this would be considered a 'current' repair expense that we can claim against our rental income?

However, this year the main 40 gallon pressurized tank attached to the boiler crapped out at the same time the attached furnance was acting up again (both units are over 20 years old). We bit the bullet and went for a high efficiency on demand 'combi' boiler unit made by IBC. It's been great - I totally recommend it!

My question: is the boiler replacement considered a 'current' or 'captial' expense? My preference is for it to be a 'current' expense so I can use it as a deduction next year, but I don't want to push the envelope either. The cost of the combi unit was about $4000 and another $4500 for parts, labor and glycol (man, when the heck did glycol spike in price?! $300 a pail! )

The other variable is that there are 4 radiant in-floor lines fed by that boiler (2 in the rental suite and 2 in my garage). I was thinking of claiming 75% of the replacement cost against the rental income (hot water on demand system+half of the radiant lines) given that about 25% of the cost of the unit supports the two lines heating my garage.

Does that make sense or am I out to lunch? A current expense is considered 'any minor repair or maintenance that brings the rental property back to original state.' Although $8500 isn't exactly minor...

[Off in the Bushes]

Originally Posted by Spidey

I know I should probably talk to an accountant, but I've come to learn that there are some smart folks that like to hang out around here.

We have a conforming basement suite that we rent out and we live upstairs in the main house (our house is zoned R1B).

Last year we had a plumber come in and replace a failed expansion tank and do a couple other repairs to our boiler unit that provides hot water and radiant in-floor heat to the rental suite. The cost was around $800, so I'm assuming this would be considered a 'current' repair expense that we can claim against our rental income?

However, this year the main 40 gallon pressurized tank attached to the boiler crapped out at the same time the attached furnance was acting up again (both units are over 20 years old). We bit the bullet and went for a high efficiency on demand 'combi' boiler unit made by IBC. It's been great - I totally recommend it!

My question: is the boiler replacement considered a 'current' or 'captial' expense? My preference is for it to be a 'current' expense so I can use it as a deduction next year, but I don't want to push the envelope either. The cost of the combi unit was about $4000 and another $4500 for parts, labor and glycol (man, when the heck did glycol spike in price?! $300 a pail! )

The other variable is that there are 4 radiant in-floor lines fed by that boiler (2 in the rental suite and 2 in my garage). I was thinking of claiming 75% of the replacement cost against the rental income (hot water on demand system+half of the radiant lines) given that about 25% of the cost of the unit supports the two lines heating my garage.

Does that make sense or am I out to lunch? A current expense is considered 'any minor repair or maintenance that brings the rental property back to original state.' Although $8500 isn't exactly minor...

I’d say without it, it’s not rentable. So claim the entire cost.

[fishnguy]

Originally Posted by Off in the Bushes

I’d say without it, it’s not rentable. So claim the entire cost.

It wouldn’t be rentable without a floor or pipes either, but those would be a capital expenditure.

It would definitely be capital.

https://www.canada.ca/en/revenue-age...-expenses.html

I’d say your calculation of 75% is off too.

[Spidey]

Originally Posted by fishnguy

It wouldn’t be rentable without a floor or pipes either, but those would be a capital expenditure.

It would definitely be capital.

https://www.canada.ca/en/revenue-age...-expenses.html

I’d say your calculation of 75% is off too.

It's still a bit grey, but my additional research thus far is tilting in the Capital direction like you said. This is a good thread with debate on both sides, and is very close to our situation. Hmmm...had I known this ahead of time I might have considered replacing the tank and later the furnace with similar units instead of going higher end. Although the gas bill has been noticeably less since the upgrade...

https://www.canadianmoneyforum.com/t...xpense.134424/

[fishnguy]

It is 100% capital expense.

I read the first few posts there. It doesn’t matter why you are buying a new water heater, whether it is an additional unit or replacement of an existing one, it provides “a long lasting benefit” and the cost should be amortized over its expected life cycle. The same would be true for your roof, floor, deck, furnace, etc. If you need, for whatever reason, to pull all the plumbing pipes or electrical wires and instal the new ones in the house, those would be capital expenditure as well.

Repairs to the existing heater (or any of the other items I mentioned) would fall under the current expense.