Subject: IS the PTT deductible? - Or should the question be is the PPT deductible.

I will be purchasing a rental property.  I know the interest on the
down payment (borrowed) and the mortgage is deductible.  Is the PTT itself
deductible?  The PTT is not covered by my mortgage.  Should I pay the PTT
with my after-tax money.  Or does it make sense to borrow for the PTT as
well - in this case, will the interest on the borrowed funds for the PTT be
tax deductible?  Thank you.

JXXX XXXXXX

 

david ingram replies:

 

I can't figure out if you are referring to the PPT (property purchase tax) paid once as part of the purchase price or if you are referring to the Property Tax which is paid annually based upon the fair market value of the property.

 

So - I will do both -

 

PPT/PTT - The Property Purchase Tax (Property transfer tax) is NOT deductible.  You add it to the purchase price of the property and it gets split up between land and building.  You do get to claim capital cost allowance (depreciation) on the total amount of the building at the rate of up to 2% the first year and up to 4% of the diminishing balance annually after that. Please note that you cannot claim CCA (depreciation) to create or increase a loss against other income.  If you have a profit from one rental, you can use depreciation from a different rental to reduce the taxable income from the first one.

 

If you borrow money to pay the PPT above or the Property tax below, the interest is deductible if the property is a rental house or business use building.

 

PT - Property tax is deductible on an annual basis against rent and/or other income.

 

Hoping this helps, I remain

 

Yours truly