What Presale Investors Can Actually Write Off (BC, 2026)

Almost nothing you pay on a BC presale before completion is tax-deductible. Not the deposit, not the interest if you borrowed to fund it, not the GST or property transfer tax you hand over on closing day. Until a tenant moves in, you own a contract — not a source of rental income — and the CRA gives you no rental statement to deduct against. On a typical $520,000 Surrey one-bedroom, that means roughly $12,400 of pre-completion interest producing a $0 write-off, and the real deduction only starting at completion.

"It's all a write-off" is one of the most expensive sentences in a presentation centre. We represent buyers only and get paid the same whether you buy or walk, so here is the actual 2026 picture — what you can deduct, what quietly disappears, and what gets added to your cost base instead.

The rule that catches almost everyone

Canadian tax deductions attach to a source of income. Under paragraph 20(1)(c) of the Income Tax Act, interest is deductible only when the borrowed money is used for the purpose of earning income from a business or property — and CRA's Income Tax Folio S3-F6-C1 is explicit that there must be a reasonable expectation of income from that use.

A presale deposit doesn't buy an income-producing asset. It buys a contractual right to purchase one, years from now. There's no rent, no T776 rental statement, and therefore nothing to deduct against. The building's construction is being done by the developer, on the developer's books — not yours.

What's deductible, and when

What you pay	Before completion	Once rented
Deposit instalments	Not deductible — it's your capital	Forms part of adjusted cost base
Interest on money borrowed for the deposit	Not deductible — no income source	Deductible going forward if the borrowing is traced to the rental
GST (5%) on the purchase	Not deductible; no input tax credit on residential rental	Added to cost base; NRRP rebate only if FMV under $450,000
Property transfer tax	Not deductible	Added to cost base
Legal fees & closing adjustments	Not deductible	Added to cost base
Mortgage interest	n/a — mortgage funds at completion	Deductible
Strata fees, property tax, insurance	Generally not — no rental source yet	Deductible
Advertising for tenants, property management	n/a	Deductible

The worked example: a $520,000 Surrey one-bedroom

Contract signed 2026, 20% staged deposit, completing 2028, then rented. Fraser Valley's apartment benchmark sits at $469,500 as of July 2026 (down 9.1% year over year), so this is a realistic City Centre unit.

Now the tenant moves in. Surrey's median asking rent for a one-bedroom is $1,750 as of July 2026, down 2.8% year over year. With $416,000 financed at 4.92% — the average discounted conventional five-year fixed among the Big Six in August 2026 — here is the first full rental year:

Line	Annual amount
Gross rent ($1,750 × 12)	$21,000
Mortgage interest (year 1; principal is not deductible)	−$20,400
Strata fees	−$3,600
Property tax	−$1,900
Insurance	−$480
Net rental loss	−$5,380

That $5,380 loss is deductible against your other income — at a 40% marginal rate, roughly $2,152 of tax saved. That is the write-off. Not the deposit, not the GST, not two years of HELOC interest. And note what it cost you to get it: a genuine $5,380 of cash out the door.

The CCA trap: worth $0 now, taxable later

Capital cost allowance on a residential rental building is Class 1, 4% declining balance — and only the building portion qualifies, never the land. But two rules gut it for most presale investors:

Assignments are a different tax world entirely

If you never complete and instead assign the contract, the deduction question is replaced by a harsher one: is the profit a capital gain or business income? Under the federal anti-flipping rule a disposition inside 365 days is business income, 100% taxable, and the BC home flipping tax takes up to 20% of the gain within 365 days, sliding to 0% only at 730 days — with no principal-residence exemption on an assignment. GST at 5% also applies to the assignment amount on new-housing assignments since May 7, 2022. Our investor red-flags breakdown walks through when that exit stops making sense at all.

What to actually do

Frequently asked questions

Can I deduct interest on money I borrowed for my presale deposit? Not while it's a presale. There's no income source yet, so paragraph 20(1)(c) isn't satisfied. Interest generally becomes deductible once the unit is rented and the borrowing is traceable to that rental use.

Is the GST on my presale deductible? No. Residential rental doesn't generate input tax credits. The GST is added to your adjusted cost base, and the only relief is the NRRP rebate, which pays nothing above $450,000 fair market value.

Should I claim CCA on my rental condo? Often no. It can't create a rental loss, and whatever you claim comes back as fully taxable recapture on sale. Run it past an accountant rather than defaulting to yes.

Sources: CRA Income Tax Folio S3-F6-C1 (Interest Deductibility); CRA Guide T4036, Rental Income, and Form T776; Income Tax Act paragraph 20(1)(c), subsection 18(2), Income Tax Regulation 1100(11); gov.bc.ca (property transfer tax, BC home flipping tax, speculation and vacancy tax); Fraser Valley Real Estate Board July 2026 statistics; Bank of Canada rate announcement July 15, 2026; Ratehub mortgage rate data, August 2026. Figures current as of August 27, 2026. This is general information, not tax advice — confirm your circumstances with a CPA.