Hi, I really like your contents. Very informative. I have a question for you. I am thinking to finish my basement but there are 2 options. Option 1 is to finish it without a separate entrance, the cost will be around 30k. Option 2 is to finish it as a legal basement, the cost will be way more, 65k like in the video and more time (4 months vs 2 months). Is it worth it? My place will need some excavation for a separate entrance as well. I also wonder about the resell value. If i invest too much, not sure if I am going to get the top dollar for my investment.
Hi there, what are the tax complications for those who convert their primary residence's basement into a rental property? I am concerned that the property will not be eligible for the capital gain tax exemption. Could you shed some light on this matter. Predicting your suggestion "check with your accountant" should say I did and didn't get a clear answer. Looking for real-life experience
CRA is intentionally vague here, the rule is as long as it's a secondary use of the property you will not lose your primary residence exemption. So things like the suite size is less than 50% of the total property, no cca deduction, no structural changes, etc. However the CRA applies these rules on a case by case basis.
That is a great question so I took the initiative to ask my accountant directly. Although I can't speak on behalf of what our clients have done nor do we have personal experience with this, here is their answer. I hope this helps: Here's a simplified explanation of what your accountant described about converting your basement into a rental unit and its tax implications: Small Rental Use: If the rental area in your basement is less than 25% of your home, you haven't made major structural changes, and you don't claim depreciation (Capital Cost Allowance) on it, then your home can still be considered your principal residence for tax purposes. This means you don’t need to do anything special when it comes to taxes. Larger Rental Use or Structural Changes: If the rental area is larger, you’ve made structural changes, or you claim depreciation, then for tax purposes, it's like you've sold that part of your house (even though you haven't actually sold it). This is called a "deemed disposition". You need to calculate how much that part of the house has increased in value since you started renting it out and potentially pay taxes on that increase. Filing Taxes: When you do this, you'll need to fill out "Schedule 3" and "Form 2091" in your tax return. Later, when you actually sell your house, you’ll split the selling price between the residential part and the rental part. You’ll need to report any profit (capital gain) from the rental part. Converting an Illegal Suite to Legal: If your basement suite wasn’t originally set up legally, you’ll need to get it inspected and apply for a building permit. The City of Calgary requires certain safety features like proper exits, smoke alarms, and separate heating systems. Once it’s legal, similar tax rules apply as above. Selling the Property: When selling, you may need to pay capital gains tax on the increase in value due to the basement suite being legal and potentially desirable. An appraiser can help determine how much more your house is worth with the legal suite compared to similar houses without one. Illegal or Non-Compliant Rentals: If your basement suite doesn’t meet city codes or is used for short-term rentals like Airbnb, you can’t deduct expenses like you can with a long-term rental. You’d have to pay taxes on the total income you earn from these short-term rentals.
@LiveInnerCity thanks for the detailed response. Appreciate the time you took to deep dive into this topic. Now I am thinking about turning my basement into a rental unit as the payback period is gonna be less than 2 years, and after that, the unit will be covering at least 40% of my mortgage and utilities. Looks like a good investment
@@yb9355 awesome! Renting out a basement unit can be a great way to offset costs. I also created a video about real estate investing you might find insightful: ruclips.net/video/gxixBMG46lo/видео.html&pp=ygUrcmVhbCBlc3RhdGUgaW52ZXN0aW5nIGluIDIwMjQgbGl2ZWlubmVyY2l0eQ%3D%3D
Depends on size but I would expect it to be around 300k. Do you want to get in touch with our contacts to see what building one would look like? Please email hello@liveinnercity.com and include your full name and number
@@ryanb.6454 Depends on size but I would expect it to be around 300k. Do you want to get in touch with our contacts to see what building one would look like? Please email hello@liveinnercity.com and include your full name and number
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Hey Shaun, thanks so much for the opportunity to show case your legal basement project, much appreciated!!
Great Video. What about parking space for tenant though? Would street parking count or driveway in front of house?
Driveway parking slot counts as parking for the City request.
Hi @mohaargurpreet! Yes, street parking or in this case the owner gave part of the driveway for them to park outside.
@@LiveInnerCityYou can’t count on street parking. You must provide tenants a parking spot on the property.
@@Raza__12false, street parking is permitted as per the City of Calgary website. Don't misinform people.
@@Itiswhatitispartna Prove it. Don’t fk around.
Hi, I really like your contents. Very informative. I have a question for you. I am thinking to finish my basement but there are 2 options. Option 1 is to finish it without a separate entrance, the cost will be around 30k. Option 2 is to finish it as a legal basement, the cost will be way more, 65k like in the video and more time (4 months vs 2 months). Is it worth it? My place will need some excavation for a separate entrance as well. I also wonder about the resell value. If i invest too much, not sure if I am going to get the top dollar for my investment.
Hi Lin! watch my reply here m.bixel1.net/qkr4x4
@@LiveInnerCity I appreciate you taking the time to reply to my question.
Hi there, what are the tax complications for those who convert their primary residence's basement into a rental property? I am concerned that the property will not be eligible for the capital gain tax exemption. Could you shed some light on this matter. Predicting your suggestion "check with your accountant" should say I did and didn't get a clear answer. Looking for real-life experience
CRA is intentionally vague here, the rule is as long as it's a secondary use of the property you will not lose your primary residence exemption.
So things like the suite size is less than 50% of the total property, no cca deduction, no structural changes, etc. However the CRA applies these rules on a case by case basis.
@@StevoSun thank you!
That is a great question so I took the initiative to ask my accountant directly. Although I can't speak on behalf of what our clients have done nor do we have personal experience with this, here is their answer. I hope this helps:
Here's a simplified explanation of what your accountant described about converting your basement into a rental unit and its tax implications:
Small Rental Use: If the rental area in your basement is less than 25% of your home, you haven't made major structural changes, and you don't claim depreciation (Capital Cost Allowance) on it, then your home can still be considered your principal residence for tax purposes. This means you don’t need to do anything special when it comes to taxes.
Larger Rental Use or Structural Changes: If the rental area is larger, you’ve made structural changes, or you claim depreciation, then for tax purposes, it's like you've sold that part of your house (even though you haven't actually sold it). This is called a "deemed disposition". You need to calculate how much that part of the house has increased in value since you started renting it out and potentially pay taxes on that increase.
Filing Taxes: When you do this, you'll need to fill out "Schedule 3" and "Form 2091" in your tax return. Later, when you actually sell your house, you’ll split the selling price between the residential part and the rental part. You’ll need to report any profit (capital gain) from the rental part.
Converting an Illegal Suite to Legal: If your basement suite wasn’t originally set up legally, you’ll need to get it inspected and apply for a building permit. The City of Calgary requires certain safety features like proper exits, smoke alarms, and separate heating systems. Once it’s legal, similar tax rules apply as above.
Selling the Property: When selling, you may need to pay capital gains tax on the increase in value due to the basement suite being legal and potentially desirable. An appraiser can help determine how much more your house is worth with the legal suite compared to similar houses without one.
Illegal or Non-Compliant Rentals: If your basement suite doesn’t meet city codes or is used for short-term rentals like Airbnb, you can’t deduct expenses like you can with a long-term rental. You’d have to pay taxes on the total income you earn from these short-term rentals.
@LiveInnerCity thanks for the detailed response. Appreciate the time you took to deep dive into this topic. Now I am thinking about turning my basement into a rental unit as the payback period is gonna be less than 2 years, and after that, the unit will be covering at least 40% of my mortgage and utilities. Looks like a good investment
@@yb9355 awesome! Renting out a basement unit can be a great way to offset costs. I also created a video about real estate investing you might find insightful: ruclips.net/video/gxixBMG46lo/видео.html&pp=ygUrcmVhbCBlc3RhdGUgaW52ZXN0aW5nIGluIDIwMjQgbGl2ZWlubmVyY2l0eQ%3D%3D
Average cost of backyard suite?
Depends on size but I would expect it to be around 300k. Do you want to get in touch with our contacts to see what building one would look like? Please email hello@liveinnercity.com and include your full name and number
It was awesome having your team come to our job site to show off the new space!
Thank you! We're always excited to collaborate on great projects.🙌
Average cost of backyard suite?
@@ryanb.6454 Depends on size but I would expect it to be around 300k. Do you want to get in touch with our contacts to see what building one would look like? Please email hello@liveinnercity.com and include your full name and number
May I have the builder contract contact ? Thank you in advance.
Hi Kaori! You can message them on their IG @elodiescontracting :)