Depreciate Property Correctly &amp; Pay Less Federal Tax
[{"id": "f8z31yf", "text": "The reason Canadian property owners are not depreciating the properties as quickly as allowed is lack of 1031-alike clause in US. Say the property is 100K, you depreciated 60K over a number of years, when you sell it for say 120K, you have to pay capital gain based on 120K - 100K + 60K = 80K, whereas if you do not depreciate the property at all, you only pay capital gain on 20K. Big difference. IRS has 1031, which allows deferral of such capital in the event of a replacement. E.g. you own a factory, you sell it then within 6 months you buy a more expensive factory, then whatever capital gain you owe from the sold factory will be deferred and moved onto the newly purchased one. This clause basically allows US real estate investors to keep rolling smaller/cheaper properties into bigger/more expensive ones without having to pay any tax as long as you keep rolling it. CRA has something similar of sort called \"replacement\" but it does not apply to expansion of business, thus not applicable to exempt most of the sell-old-then-buy-new transactions of capital gain.", "replies": [], "depth": 1}]