Capital expenditures are expenses incurred to acquire property, improve property or make an addition to property. In general, such expenditures are not deductible in the calculation of rental income and must be added to the capital cost of the property.
The following expenditures may not be deducted as operating expenses:
- the acquisition cost of a rental property
- legal and engineering fees, and other expenses related to the purchase of the property (transfer taxes, relocation costs, etc.)
- the purchase price of items rented out with the property (such as the stove, refrigerator or furniture in a furnished apartment) and replacements
- the cost of adding a fireplace
- the cost of adding a garage
Certain capital expenditures incurred to adapt a building to the needs of persons with a motor impairment may be deducted in the calculation of your income for the year in which they were incurred, instead of being added to the capital cost of the building.
Such expenditures must relate to:
- the installation of manually controlled devices for opening doors
- the installation of ramps inside and outside the building
- alterations to a bathroom or the modification of an elevator or a door to facilitate the use of a wheelchair
In addition, expenditures incurred to meet the needs of persons with disabilities may be deducted for the year in which the expenditures were incurred. Such expenditures relate to the acquisition or installation of one of the following:
- position indicators for an elevator car, such as auditory indicators or braille panels
- visual fire alarms
- telephone devices to assist deaf persons
For further information, consult the brochure Individuals and Rental Income (IN-100-V).