Do I owe tax when I turn my house into a rental?
Usually there is a deemed disposition at that moment. You are treated as having sold the property to yourself at its value on the day the use changed, even though no money moved and the title did not change hands. Any gain that accrued while it was your home is measured then, and the property begins its rental life with a new cost. An election can defer that result in some situations, but it has to be filed, and it cannot be filed usefully years later once the years in between have been reported another way. The practical work is establishing the value on the date of the change and deciding, before anything is filed, which treatment you want on the record.
What counts as a change of use for tax purposes?
A change in what the property is actually used for, not a change in your intentions about it. Moving out and letting the property is the common case. Moving back into a property you had been letting is the same event in reverse. Converting part of a home into a separate let unit, or taking that unit back into the household, is a partial change and is handled proportionately. A gap between tenants, a period of marketing, or a stated plan to let the property at some future point is not a change of use. The question a reviewer asks is what the property was used for, and the answer comes from tenancy records, utilities, insurance and the addresses on your own filings.
Can I defer the deemed disposition when I rent out my home?
In some circumstances yes, by election, which keeps the property on its original cost until an actual sale. The election is a choice with consequences on both sides. It postpones the measurement of the gain, and it also fixes how the property is treated for the whole period that follows, including whether depreciation may be claimed against the rental income. Claiming that depreciation can undo the election, so the sequence matters. The decision belongs before the first rental return is filed rather than after, because the first return is itself a statement of the treatment you have adopted. Our fee for reviewing an election of this kind is agreed in writing before the work starts.
Do I need a valuation when a property changes use?
You need a defensible value for the date of the change, and that is far easier to obtain on the day than to reconstruct afterwards. A deemed disposition has no sale price, so the value is whatever you can support: an appraisal prepared at the time, comparable sales from that period, an assessment notice, or a lender valuation obtained for a refinancing in the same season. Reconstructions are accepted, but they cost more to prepare and they are weaker, because the evidence has to be assembled from records made for other purposes. The cheapest moment to spend an hour on this is the week the tenant moves in.
What happens when I move back into a property I was renting?
It is a change of use again, in the other direction, and it is measured the same way. The rental period ends, the property is treated as disposed of at its value on that date, and the gain that accrued over the rental years is measured against the cost the property carried while it was let. This is the one people are most often surprised by, because nothing about moving home feels like a sale and no funds change hands. The second change of use also matters later: when the property is eventually sold, its history is a sequence of periods with different treatments, and the return has to reflect that sequence rather than one long holding period.
Does a change of use here affect my return in the other country?
Often, and rarely in step. A deemed disposition is a domestic construct. The other country may not recognise that anything happened, in which case a gain is reported in one system with no corresponding event in the other and no foreign tax to credit against it that year. When the property is eventually sold the positions can reverse, because the second country may measure the whole gain from the original purchase while the first has already taxed part of it. Relief exists, but it is claimed by matching categories and years, so the paperwork created at the change of use is what makes the later claim possible.
How much foreign income is tax-free in Canada?
None of it is tax-free for being foreign. A Canadian resident is taxed on worldwide income, so foreign salary, interest, dividends, rent and gains all go on the return, converted to Canadian dollars. What genuinely reduces the bill is the basic personal amount, the credit for foreign tax already paid, and any treaty article that exempts a specific type of income. The reporting thresholds people have in mind — the foreign property statement, for one — govern reporting, not exemption. See the foreign tax credit.
Do Canada and the United States share tax information?
Yes, through more than one channel. The treaty has an exchange-of-information article that supports both routine and on-request exchange. Separately, an intergovernmental agreement has Canadian financial institutions identify US-reportable accounts and report them to the CRA, which passes them to the IRS, with the reverse flow for Canadian residents. Most other country pairs use the Common Reporting Standard for the same purpose. See FATCA reporting.
