Tax help?

[mlv]

I am currently renovating my basement to be use for the daycare. Can I claim these renovations? I am putting a bathroom down there new ceiling, flooring, stairs, and of course plastering and painting.

[mickyc]

yes keep all receipts! Not sure if it is 100% but you certainly can claim a portion. Give your accountant your total for your renovations and he will know what to do with it.

[mlv]

Thank you !

[torontokids]

Just a word of warning. I have read on here that some things you claim you would be subject to a capital gains tax so just mention this to your accountant as it might not make sense to claim all your expenses.

[playfelt]

Be very careful claiming something like a basement renovation. When you sell your house in theory the basement will count as a capital gain and cost you taxes since it has improved the value of your home - ie the home sells for more with the basement finished than without. You can claim some of the finishing things and add ons like paint for the walls or things that will wear out over a short period of time - think things like the towel bar if you are putting a lower one in for the kids then totally 100% write of. But other items are too risky to claim. You can claim them and it will seem like you are getting away with it but when you sell and change the address on your following tax form you don't want RC coming back and asking basically to be reimbursed for the extra value.

[playfelt]

Renovations are a bit different in the sense that the value of the finished basement is already figured into what you paid for the house - ie it was done before you moved in. Replacing items such as carpets or painting the walls is claimable as a repair unless you upgrade such as from thin carpet to hardwood. The bathroom again is an addition to add value to the home down the road so claim only parts of it.

[mlv]

I was think the same thing playfelt. That is why I ask first. Thank you for the feed back ladies.

[Mike]

Playfelt's answer pretty much covers it, but I currently do home renovations, so speaking from experience, I thought I should answer in my own words as well.

There are 2 factors when doing reno work. Expenses and capital gains. Any major changes like adding a bathroom will be capital gain. Minor changes will depend if the change is necessary for daycare, like any minor changes done for safety issues. That can be declared a business expense. Smaller jobs, like repainting, would also be an expense, as long as there is some reason to do it for the business.

When you get into capital gains like a new bathroom, there is yearly depreciation, but that gets into an accountant or some studying.