Ask The Expert: Selling One Property to Re-Invest in Another

Do I sell one property to pay off another because the money used to “re-invest’ is exempt from some taxes?

Navigating a sea of updated new tax rules and changes to existing rules can be murky waters, so why do the heavy lifting yourself when an expert accountant can find the answers for you? George Dube is a real estate investor and real estate tax account – here is his take on this popular question:

While you may decide from an investment perspective to sell a property to expand your portfolio or pay off debt, this will typically provide little in the way of tax benefits. This is quite the contrary for most situations, as the profits on the sale will be taxed without a “deduction” for funds reinvested.

Thus, fewer funds are available for reinvestment. Some small exceptions apply to these comments; however, we find that most people looking at deductions or deferrals for reinvesting their profits are referencing some particular U.S. tax rules, which often sound great but can be a disadvantage to Canadians investing in the U.S. These U.S. tax rules are not applicable in Canada.

Have you thought of using a strategy like this? Were your assumptions correct or incorrect? Respond in the comments section below!

If you’re finding it difficult to navigate the ever-changing tax world and need a little advice, visit Dube & Cuttini to find out more.