Rental Income Tax Canada Guide 2025

Everything Canadian landlords need to know about reporting rental income, claiming deductions, and minimizing tax on the T776 form.

What Counts as Rental Income?

You must report all rental income from real property located in Canada. This includes:

• Long-term residential rentals (month-to-month or fixed-term leases)
• Short-term rentals (Airbnb, VRBO, vacation rentals)
• Renting out a room in your home
• Commercial property rentals
• Amounts received for parking, laundry, or storage associated with the rental

Rental income is reported on Form T776 (Statement of Real Estate Rentals) and the net income is added to your personal tax return on line 12600.

Eligible Rental Expense Deductions

Expense	Deductible?	Notes
Mortgage interest	Yes	Interest only — not principal payments
Property taxes	Yes	Proportional if partial rental
Insurance	Yes	Rental/landlord insurance
Repairs and maintenance	Yes	Not capital improvements
Property management fees	Yes	100% deductible
Advertising costs	Yes	Listing fees, signs
Utilities paid by landlord	Yes	Heat, hydro, water
Accounting/legal fees	Yes	Related to rental operation
Capital improvements	No (directly)	Add to ACB or claim via CCA
Your own labour	No	Cannot deduct time value

Capital Cost Allowance (CCA) on Rental Property

Capital Cost Allowance (CCA) lets you deduct the depreciation of your rental building over time. Rental buildings fall into CCA Class 1 (4% declining balance rate). Key rules:

• CCA is claimed at your discretion — you don't have to claim it every year
• You cannot use CCA to create or increase a rental loss (it can only reduce rental income to zero)
• When you sell, recaptured CCA becomes fully taxable income
• Land is not depreciable — only the building portion qualifies for CCA

Renting Part of Your Home

If you rent out a portion of your principal residence (a basement suite, room), only the rental portion's expenses are deductible. Calculate the rental percentage by area: if your suite is 25% of total home area, 25% of mortgage interest, property taxes, and utilities are rental deductions. Be cautious — renting out part of your home may affect your principal residence exemption when you sell.

Short-Term Rentals (Airbnb/VRBO)

Short-term rental income is fully taxable. Unlike long-term rentals, short-term rentals may also be subject to GST/HST if your annual revenue exceeds $30,000. Register for a GST/HST number and charge guests if you cross this threshold. Some municipalities have also enacted local licensing and restrictions on short-term rentals.

Rental Losses

If your rental expenses exceed your rental income, you have a rental loss. Rental losses (excluding CCA) can be deducted against other income (employment, business) to reduce your overall tax bill. This is different from business losses and has specific restrictions around CCA as noted above.

Record Keeping for Landlords

Keep all rental-related records for at least 6 years from the end of the tax year they relate to. This includes lease agreements, rent receipts or bank statements, all expense receipts, mortgage statements showing interest paid, and property tax bills. Good record keeping protects you in the event of a CRA audit.