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Posted on 03/07/2018 in Category 1

Tax Implications Every Cabin Owner Should Know About

Tax Implications Every Cabin Owner Should Know About

The cabin season is fast approaching for many Canadians with all the fun and relaxing activities it involves.

Aside from the memories you'll be creating there are few facts you should know regarding tax implications.Yes I know how boooring. However, information is power. 

So first item to consider is the capital gain to report in the year of the sale of your cabin(cottage). Unless you designate your cabin (cottage,chalet) as principal residence (yes even though you, your spouse or child spend only a couple of months a year at the cabin, provided that the main reason for owning the property is not to gain or produce income) because possibly you're a tenant in the city, there are no income taxes to pay upon the sale of the property.

Now if you already have a designated principal residence, you need to properly calculate any tax owing on the sale of your cabin. You would pay tax at your marginal tax rate on 50% of the capital gain.

To calculate the capital gain,you take the proceeds of disposition from the sale of your property, less any outlays and expenses incurred by you to sell the property (such as real estate commissions) and deduct the ACB (adjusted cost base), i.e the amount you paid for the property, capital expenditures you incurred such as the cost of additions and major improvements expenses to the property. You must provide receipts. Normal repairs and maintenance expenses cannot be added to the ACB.

In another blog we'll talk about income producing property. Now you are better prepare for tax purpose. For additional information contact your accountant or Canada Revenue Agency.

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