Just realized I may have made a super huge mistake that will result in tens of thousands of tax in the future
We purchased our TH at 1.3M in 2023 when the market was ATH. Last year before Christmas we purchased a house but wouldn’t be able to sell the TH so we had to rent it out at a loss (nearby comparable property is around 1.1M). My mortgage + strata + insurance + property tax on the TH is around $5000 but can only rent it out for $3600.
However, I just realized that because I converted it to a rental property, now CRA sees the cost of the TH is only 1.1M, so even I’m able to luckily sell it for 1.2M in the next couple of years, I still need to pay capital gain tax! I’m already losing 100K but in CRA’s eyes I’m making money by selling the property and I will probably need to pay another 25K in tax.
If I had already known this, I would have just lowered my listing price further more to sell it.
Note: I know I can do 45(2) but as we’re having another house which will surely appreciate faster than the TH, it’ll be unwise to elect the TH as PRE.