Renting primary residence in Toronto

[Carolyn Guertin]

I have some questions that I hope the BP community can answer for me.

My elderly father has just moved into in a retirement home. He is weighing the pros and cons of selling versus renting out his home in the GTA. He owns the house free and clear, but he hasn't maintained it very well the last few years as his health has declined.

If he rents it, is it still his primary residence? What are the tax implications of renting it when he is living elsewhere? Can he claim repairs or utilities on his tax return to offset any rent monies he collects? Will it alter his tax bracket? Will he have to pay capital gains on it if it has been rental property when he does eventually decide to sell it? The house is starting to need a lot of work. Would renting it help make renovations and repairs a better financial option? I'm not really sure of what questions to ask or what issues his living situation might raise, so I'd appreciate any insights the community can give me to understand the implications of both renting and selling in his situation.

Thanks,
Carolyn

[Eric Delcol]

Carolyn Guertin

"If he rents it, is it still his primary residence? "

No. Primary residence is where you primarily live - that is the test.

"What are the tax implications of renting it when he is living elsewhere? "

He will have to claim rental income. This can be reduced by deductible expenses.

"Can he claim repairs or utilities on his tax return to offset any rent monies he collects? "

Yes, see above.

"Will it alter his tax bracket? "

Probably not, unless we're talking about a luxury estate.

"Will he have to pay capital gains on it if it has been rental property when he does eventually decide to sell it? "

Only primary residences are exempt from capital gains. I.e. If he rents it out, then sells - that triggers capital gain. However, you get credit for years the property was your principal residence.

"The house is starting to need a lot of work. Would renting it help make renovations and repairs a better financial option? "

Probably not. Renters are going to expect the property to be in good condition.

"I'm not really sure of what questions to ask or what issues his living situation might raise, so I'd appreciate any insights the community can give me to understand the implications of both renting and selling in his situation"

If you see this being a temporary living transition - renting may be a good transition until he can move back in. If it's more of a permanent move I'd suggest selling.