Capital Improvements or write offs

[Chris A.]

Hello everyone. This summer I did a BRRRR in Ontario and I'm wondering what I should do regarding claiming the renovation costs. I purchased the property at the start of July and renovated it until Oct 15th. In this period I spent about $50,000 between the labour and material.

Can I claim this 50k as write offs or do I have to add this as a capital improvement? The main issue is that the 50k renovation increased the home value by 245,000 so that 50k in write offs would save me a lot more money.

Any advice would be greatly appreciated.

[Ken Halef]

Hi @Chris Arsenault @Tyler Stiller @Kash Jawed Seen the discussion here and thought I would jump in to confirm what looks like everyone already seems to know. I'm a CPA based in ottawa and what I typically tell my clients is the following to illustrate what is an expense vs capital in natur. See below.

Items to expense would include the following :

1. >Costs to restore an asset to its original working condition (i.e stove repair);
2. >Reoccurring items (i.e. replacement of filters, lightbulbs, etc.);
3. >Useful life of the asset purchased is short or not material (high in cost) such as a showerhead

Items that warrant capitalization are :

1. >Assets that have a long useful life (1yr<). Some examples include refrigerator, fireplace, balcony and so on.
2. >Incurred costs to bring a property/asset to a condition suitable for use. Common example is costs incurred upon acquisition of a property most commonly renovation costs.
3. >Costs that enhance the life of an asset beyond its original useful life such as paving, kitchen reno's, flooring replacement, etc.

Hope this adds some clarity.