Rental Income Tax Canada 2025 — Complete Guide

Rental income in Canada is added to your total income and taxed at your marginal rate — but you can deduct a wide range of expenses to reduce your net rental income. Understanding these deductions, especially Capital Cost Allowance (CCA), can significantly reduce your tax bill. Here's everything landlords need to know for 2025.

Net Rental Income Calculator

Annual Gross Rent Collected ($) Mortgage Interest (not principal) ($) Property Taxes ($) Insurance ($) Maintenance & Repairs ($) Management Fees / Advertising ($) Other Eligible Expenses ($) Your Marginal Tax Rate (%)

Rental Income — What You Must Report

All rental income received from tenants must be reported on Form T776 (Statement of Real Estate Rentals) and included on your T1 personal tax return. This includes:

Monthly rent payments
Advance rent (first and last month's deposit)
Lease cancellation fees
Services provided by tenants instead of rent
Damage deposits retained (if not returned)

You report rental income in the year it is received, regardless of when it is earned (cash basis for most individuals).

Allowable Rental Deductions

Expense Type	Deductible	Notes
Mortgage interest	Yes	Interest only, not principal repayment
Property taxes	Yes	Full amount paid
Property insurance	Yes	Building and liability insurance
Repairs and maintenance	Yes	Current expenses, not capital improvements
Property management fees	Yes	Fees paid to property managers
Advertising	Yes	Online listings, MLS
Accounting and legal fees	Yes	Relating to rental
Condo fees (rental unit)	Yes	Full strata/condo fee
Utilities (if landlord pays)	Yes	Heat, water, hydro
Capital improvements	No (via CCA)	Must be claimed as CCA over time
Mortgage principal	No	Never deductible

Capital Cost Allowance (CCA) for Rental Property

CCA is tax depreciation on the building (not land). You can claim CCA on a rental property, but you cannot use CCA to create or increase a rental loss. Key classes:

Class 1 (4%): Most buildings built after 1987, or with more than 90% residential use after 1988
Class 3 (5%): Most brick or stone buildings built before 1988
Class 8 (20%): Appliances, furniture, fixtures in a rental property
Class 10 (30%): Vehicles used in rental operations

  CCA Caution: Claiming CCA on a rental property reduces your Adjusted Cost Base (ACB) and can trigger recapture (fully taxable) when you sell the property. Many landlords choose not to claim CCA to avoid this tax hit on sale.

Renting Part of Your Home

If you rent a portion of your principal residence, you must report the rental income and can deduct a proportional share of expenses (usually based on square footage). However, claiming CCA on the rented portion can trigger a change in use, potentially affecting the principal residence exemption on sale. Most advisors recommend NOT claiming CCA on home-based rentals for this reason.

GST/HST Registration for Landlords

Long-term residential rentals (one month or more) are generally exempt from GST/HST — you do not charge GST/HST and cannot claim input tax credits (ITCs). Short-term rentals (under one month) are taxable and require GST/HST registration if revenues exceed $30,000/year.

Track Your Rental Business with KOHO

KOHO's spending tracking tools make it easy to monitor rental expenses throughout the year, simplifying tax filing. Open a separate KOHO account for your rental business cash flow.

Open KOHO — Use Code 45ET55JSYA