Are renovation costs before I first rent out a property treated as current or capital expenses?

Renovation and repair costs incurred before a property is rented out for the first time are generally treated as capital expenses, even if the individual repairs look minor on their own. CRA's reasoning is that this work isn't maintaining an existing rental use - it's putting the property into a new, income-earning condition for the first time, which is a capital purpose rather than upkeep of an ongoing rental operation.

This trips up a lot of people who buy a rundown property, do what feels like routine repair work - patching drywall, replacing flooring, fixing plumbing - and expect to deduct it all in the year it was done. Because there was no rental income being earned yet when the work happened, CRA typically requires these costs to be added to the property's capital cost and depreciated through CCA instead, rather than deducted immediately. Once the property is actually rented and later needs similar repairs to maintain that ongoing rental use, those later repairs are far more likely to qualify as current expenses. Keeping renovation costs and timing well documented, and knowing this distinction before you start work, can meaningfully change how the numbers work out at tax time.