Re: “Housing crunch leads to more coach houses” (April 21). While the ideas of extra revenue or reduced environmental impact or just “this is cool” have their value, the tax implications of a carriage home are generally not known.
Suites found within the general foundations of a home are considered to be part of your principal residence and as such have no additional tax implications at the time of the sale of your home.
Carriage homes do.
When you decide to build a carriage home, CRA (Canadian Revenue Agency) requires a “deemed disposition.” This is basically a statement that the homeowner has changed the use of that portion of the land on which the carriage home is to be built.
So far, so good. You build the carriage house and are basically now a landlord with the duties to declare income and claim expenses. The income tax outcome of that process will vary depending on the overall financial condition of the landowner.
Suffice it to say that a net of $15,000 ($1,250 per month after expenses – not unrealistic if you are charging market rates) may push individual incomes into a higher tax bracket with significant results.
The bite comes when you sell. Now the portion of the land used is subject to capital gains. Also the building, if it has increased in value, will be subject to capital gains. If you have depreciated the building to reduce income taxes, you could encounter recapture (simply put, tax due on the difference between the depreciated value and market value) and, finally, there may be GST rooting around in that whole process.
Carriage homes contribute to easing the need for more housing, not necessarily affordable housing but more housing nonetheless.
Planning to build a carriage home? Do all your homework. Planning, design, and financial.
Park Georgia Realty