Camrose Real Estate Accountant

Understanding Key Real Estate Accounting Concepts

BOMCAS Canada is committed to educating and empowering our clients with the knowledge they need to make informed financial decisions. Here are some key concepts in real estate accounting:

Rental Income: This refers to any payment you receive for the use or occupation of a property, such as houses, apartments, rooms, or office spaces. It’s crucial to track all sources of rental income accurately.

Rental Operations: This includes services you provide to tenants, such as heat, lighting, laundry, cleaning, or security. Understanding which expenses are part of rental operations can affect your tax deductions.

Rental Property: This is typically a building or leasehold interest owned by a taxpayer or partnership, primarily used to generate revenue from rent. The type of rental property can affect when it is considered available for use.

Availability for Use: For non-building rental properties, the availability for use date is usually the earliest of the date of first use to earn income, the second year after acquisition, or before property disposal. For buildings, this is the earliest of when construction is complete, 90% is rented, the second year after acquisition, or before disposal.

Capital Cost: This is the base amount on which you first claim capital cost allowance (CCA). It includes the purchase price (excluding land), legal and accounting fees, and the cost of additions or improvements. Understanding capital cost is essential for calculating your CCA correctly.

Capital Cost Allowance (CCA): This is the amount you can deduct over time for depreciable property used in your rental activities. It allows you to recover the cost of the property over its useful life and lower your overall tax liability. CCA can be claimed on buildings under construction once you start generating rental income from them.

Capital Property: This generally includes any property bought for investment purposes or to earn business income. It includes principal residences, stocks, bonds, land, buildings, and equipment used in your business or rental operations.