Tax on Rental Income Canada 2026 | Net Rental & CCA Calculator

Rental income from Canadian properties is fully taxable and must be reported on your T1 return, regardless of whether you receive a T4A or any other slip. However, landlords can deduct a wide range of expenses against rental income to arrive at "net rental income" — the amount actually added to taxable income. Understanding what's deductible, when to claim Capital Cost Allowance (CCA), and how the principal residence exemption interacts with rental use are the three key areas of rental property taxation in Canada.

What Counts as Rental Income?

Rental income includes any payment received for the use of real property you own: monthly rent from long-term tenants, short-term Airbnb or VRBO income, rental of a basement suite, garage or parking space rental, and even equipment rental if it occurs on your rental property. Rental income is reported on Form T776 (Statement of Real Estate Rentals) and flows to Line 12600 of your T1 return.

Deductible Rental Expenses

You can deduct reasonable expenses to earn rental income. These fall into two categories: current expenses (fully deductible in the year incurred) and capital expenses (deducted through CCA over time).

Current (Operating) Expenses — Fully Deductible

Mortgage interest (not principal repayment — only the interest portion)
Property taxes
Property insurance premiums
Property management fees and realtor fees for finding tenants
Maintenance and repairs (routine — not improvements)
Utilities paid by landlord (hydro, gas, water)
Advertising costs (listing fees, photography)
Office expenses for rental administration
Professional fees (accountant fees for rental income reporting, legal fees for lease drafting)
Travel expenses to inspect or maintain the property (50% for meals; full amount for transportation)
Landscaping and snow removal (if landlord's responsibility)

Capital Expenses — Deducted via CCA

Roof replacement, major renovations, structural improvements
Appliances, furnace, air conditioning units
Paving a driveway (new construction, not repair)
The building itself (Class 1 — 4% declining balance)

Capital Cost Allowance (CCA) on Rental Properties

CCA is the tax depreciation on capital assets used to earn rental income. The building (excluding land) falls under Class 1 (4% declining balance rate). Claiming CCA reduces net rental income in the short term but creates a larger recaptured CCA on sale — effectively deferring tax rather than eliminating it.

CCA cannot create or increase a rental loss. You can only claim CCA up to the amount that reduces your net rental income to zero — you cannot use CCA to create a rental loss that offsets other income. This is a key CRA rule for rental properties, different from business income where CCA losses can offset other sources.

Half-year rule: In the year you acquire a rental property, you can only claim half the normal CCA rate (2% instead of 4% on Class 1 buildings). This is the "half-year rule" or "50% rule" for CCA in the year of acquisition.

Rental Income Tax Calculator

Calculate Net Rental Income & Tax — 2026

Annual gross rent collected ($)

Mortgage interest paid ($)

Property taxes ($)

Insurance ($)

Repairs & maintenance ($)

Other expenses ($)

Your marginal tax rate (%)

Gross rental income:

Total deductible expenses:

Net rental income:

Estimated tax at marginal rate:

After-tax rental income:

Principal Residence vs. Rental Property

A property can only be designated as your principal residence for years when you or your family actually inhabited it. If you rent out a property for part of its ownership history, you can designate it as your principal residence for years you lived there — and only those years are covered by the principal residence exemption on sale.

For example: you owned a property for 10 years, lived in it for 6 years and rented it for 4 years. You can designate it as your principal residence for the 6 years of personal use. The capital gain attributable to the 4 rental years is taxable (calculated by prorating the total gain: 4/10 × total gain = taxable portion).

Change in Use — Personal to Rental

When you convert a property from personal use to rental (or vice versa), there is a deemed disposition at fair market value — as if you sold and reacquired the property at FMV on the date of change. This triggers capital gains tax on appreciation to that point (subject to the principal residence exemption for years of personal use). The CCA clock also resets.

An election under s.45(2) of the Income Tax Act can defer this deemed disposition for up to 4 years when converting personal to rental use — useful if you plan to return to the property. You cannot claim CCA during the deferral period if you make this election.

Short-Term Rentals (Airbnb/VRBO)

Short-term rental income is generally treated as rental income (not business income) unless you provide hotel-like services (meals, daily cleaning, concierge). Most Airbnb hosts report income on T776. If you rent out more than 50% of your home short-term, you may lose the principal residence exemption for those years on the proportionate value. Note: many municipalities have restricted or banned short-term rentals — always check local zoning rules.

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