I'm not sure I understand either scenario, and I'm an accountant, in real estate, and I have personal rental properties.
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Originally Posted by mustache ride
The first was to pay it as i normally have, just paying the percentage of principal paid plus profit in my normal tax bracket like always.
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Why are you calculating the amount of taxes on a percentage of your principal paid? The formula for net rental income is to take all of your rents collected and subtract all of your expenses. Your expenses are typically mortgage interest and property taxes, plus they could include strata fees, property manager fees, utilities, cleaning, and repairs and maintenance. The principal you pay has absolutely nothing to do with your income statement.
At the end of the year, assuming you hold the rental property personally, there will be a net profit from the above calculation. You now have the option to take CCA (capital cost allowance) on your rental property. I can't tell from your scenario whether this is a stand alone property, like a condo, or it's a basement that you are charging rent on. Which one it is will affect how you do it, and future consequences, but either way, you can only take CCA up until the amount the will give you a net income of zero. You cannot take CCA to give you a rental loss.
If you take CCA on your rental property, and sell it for more than the UCC, you will have recapture on the amount you took CCA of. This is the same as if you moved into it personally. There are ways to reduce this burden, including a proper split between land and building. These are scenarios that a good accountant, well versed in this field, could show you. You should ensure you are speaking with one of them, and not solely relying on internet information. Based on the scenarios you have given us, I'm not sure your current one understands accounting or tax law very well.
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Originally Posted by mustache ride
The second was one i have never heard before
Depreciate it on a given percentage based on the length of my mortgage which would allow me to write that amount off each year.
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This is not correct anywhere. You can take depreciation for accounting purposes, but it is based on the useful life of the asset, not based on how the mortgage is calculated. You can absolutely take a fixed percentage over a set period of time. This is called the straight line method. You can also use the declining balance method, which CCA is an example of. Either way, this is for accounting purposes only, and when you have your tax books done, you can't create a net rental loss.
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Originally Posted by mustache ride
In the first scenario i pay about $600 and the second i receive a $1600 refund added to my return. However fifty percent of the portion that was written off now incurs capital gains taxes in the event i sell.
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As stated above, you can't create a loss, which then gives you a refund on rental properties. Based on your figures, you can either pay taxes of $600, or reduce that amount to zero by taking CCA. You don't have to take all the CCA if you don't want to. You don't have to take any. That amount is optional from zero up until your net rental income before CCA.