Reporting Rental Income in Canada
All rental income earned by Canadian residents must be reported on your personal income tax return using Form T776 (Statement of Real Estate Rentals). This includes income from long-term tenants, short-term rentals (Airbnb), basement suites, and commercial properties.
What Expenses Are Deductible?
You can deduct reasonable expenses incurred to earn rental income, including:
- Mortgage interest (not principal)
- Property taxes
- Landlord insurance premiums
- Repairs and maintenance (not capital improvements)
- Property management fees
- Advertising and listing fees
- Professional fees (accountant, legal)
- Utilities you pay as landlord
- Travel to inspect the property (at CRA mileage rates)
- A portion of your home expenses if you manage from a home office
Capital Cost Allowance (CCA)
You can claim CCA (depreciation) on the building portion of a rental property, typically at 4% per year (Class 1). Be cautious: CCA creates recapture income when you sell. Many small landlords skip CCA to avoid this complexity — consult an accountant.
What You Cannot Deduct
- Mortgage principal payments
- Personal use of the property
- Capital improvements (new roof, renovations — these are added to the adjusted cost base)
- Losses from a property that's not a true commercial activity
GST/HST Considerations
Long-term residential rentals are exempt from GST/HST — you don't charge it, but you also can't claim input tax credits on related expenses. Short-term rentals (less than 30 days) are subject to GST/HST if your revenues exceed $30,000/year.
Keep Good Records
The CRA has a 3-year audit window (6 years for suspected fraud). Keep all receipts, bank statements, lease agreements, and inspection records organized by property and year.