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Updated about 2 years ago on . Most recent reply presented by

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43
Posts
14
Votes
Warren Marshall
  • Real Estate Agent
  • Red Deer Alberta
14
Votes |
43
Posts

Is it worth claiming depreciation in Canada?

Warren Marshall
  • Real Estate Agent
  • Red Deer Alberta
Posted

Every Podcast tells me the answer is yes, however every time I talk to my accountant he says that depreciation isn't always worth claiming.     He mentions that when you go to sell the property or if you pass away your kids will have to pay the depreciation recapture.   Basically cancelling out any benefit it has.       Am I missing something, or is there a follow up question I should be thinking about?  


Thanks in advance, 

Warren

Most Popular Reply

User Stats

43
Posts
14
Votes
Warren Marshall
  • Real Estate Agent
  • Red Deer Alberta
14
Votes |
43
Posts
Warren Marshall
  • Real Estate Agent
  • Red Deer Alberta
Replied

Follow up post for who ever finds this down the road:    

Positives of Depreciation: 

TVM - Time value of Money   I originally thought of the depreciation expense as profit/cash flow.   However it is more like interest free borrowed money.   To benefit from depreciation the most you must reinvest the depreciated amount and hold off selling the property until you are net positive. 

What I still haven't figure out yet:

- What holding period length is the minimum in order to reap the rewards?  (my assumption is 5+ but really not sure)  

-Not sure how to calculate the recapture amount yet.  Haven't found a good calculator or formula. 

-Would like to know if anyone has invested their depreciation expense into an investment account (ETF for example) every year and pulled out what was needed to pay recapture and Capital gains at the end..?    

Helpful Link:

I found this podcast by REI Mastermind really interesting about Accelerated depreciation and Cost Segregation Studies. Worth a listen if interested but not sure if it's completely applicable in Canada.

https://podcasts.apple.com/ca/...

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