If you earn rental income in Canada, understanding what you can deduct—and how to document it—can meaningfully lower your tax bill. This in-depth guide explains all major deductions you can claim from rental income, how to separate current repairs from capital improvements, what to do about mortgage interest, condo fees, vehicle travel, and CCA (Capital Cost Allowance), and how to keep audit-ready records for your T1 and Form T776 (Statement of Real Estate Rentals). Each section explains what’s deductible, the practical way to claim it, and the tools that keep you organized—without overcomplicating the rules.
How Rental Deductions Work
- Purpose: You can deduct reasonable expenses incurred to earn rental income.
- Current vs. Capital: Day-to-day repairs and routine costs are current expenses; work that improves or extends the life of the property is usually capital and claimed over time via CCA.
- Business Portion Only: If something is partly personal (e.g., phone, travel), deduct only the portion tied to managing the rental.
- Mortgage Interest vs. Principal: You can deduct interest, but not the principal portion of mortgage payments.
- Documentation: Keep invoices, receipts, agreements, bank/credit statements, mileage logs, and related papers for at least six years after the tax year.
- GST/HST: Long-term residential rent is generally exempt from GST/HST (so no ITCs on purchase/operating costs), but special rules apply for new residential rental property rebates and short-term rentals—speak with a tax accountant Toronto.
What You Can Deduct (Detailed Categories with Practical Tips)
1) Mortgage Interest and Bank Charges
What’s deductible: Interest on money borrowed to buy, improve, or refinance the rental; bank fees linked to your rental account.
How to claim it properly: Keep your loan agreement, amortization schedule, and monthly statements. If you refinance or use a line of credit, trace borrowed funds to the property or improvements. Track interest separately from principal so your T776 schedule is accurate.
Tools that help: A dedicated rental bank account; digital storage for loan documents.
2) Property Taxes and Municipal Charges
What’s deductible: Property taxes, local improvement charges related to services the tenant benefits from, and some service fees.
How to claim it properly: Keep tax bills and proof of payment; if you charge tenants for a portion, record the recovery as income and still claim the full expense.
3) Insurance (Landlord/Property and Liability)
What’s deductible: Landlord insurance, including property and liability coverage; specialized riders (e.g., rental income protection) may also qualify.
How to claim it properly: Keep the policy documents and invoices; if your policy renews mid-year, ensure your expense reflects the coverage period.
4) Utilities and Services You Pay
What’s deductible: Heat, hydro, water, waste removal, security, and any bundled services the landlord pays under the lease.
How to claim it properly: If tenants reimburse part of the utilities, record the reimbursement as income. Keep separate meters where possible to avoid disputes and simplify calculations.
5) Condominium Fees (For Rental Condos)
What’s deductible: Monthly condo fees and special assessments related to current expenses of the corporation.
Capital caution: Some special assessments fund capital improvements (e.g., building envelope). Those amounts should be capitalized (added to building cost) rather than expensed.
How to claim it properly: Keep notices from the condo corporation to determine whether an assessment is current or capital.
6) Advertising and Tenant Placement
What’s deductible: Online listings, signboards, application platforms, and reasonable referral fees to find tenants.
How to claim it properly: Save invoices and screenshots; keep records of dates posted and leases signed (this also proves intent to earn income during short vacancies).
7) Repairs and Maintenance (Current)
What’s deductible: Routine work that restores the property to its original condition (e.g., patching drywall, repainting between tenants, minor plumbing fixes, replacing broken door hardware).
How to claim it properly: Keep itemized invoices describing the work. If the job significantly improves the property or extends its life (e.g., adding a second bathroom, full kitchen upgrade), treat it as capital expenditure.
8) Caretaker, Property Management, and Professional Fees
What’s deductible: Property management fees, caretaker salaries/contractor charges, accounting and legal fees tied to the rental (e.g., lease drafting, eviction proceedings).
How to claim it properly: Keep contracts, timesheets (if applicable), and invoices. For legal fees related to acquiring the property, capitalize to cost base.
9) Travel and Motor Vehicle for Rental Management
What’s deductible: Reasonable travel to collect rent, supervise repairs, or manage the property, especially when the rental is in another municipality.
What’s not deductible: The personal portion of trips; board and lodging on overnight trips generally aren’t deductible for routine visits.
How to claim it properly: Maintain a mileage log (date, purpose, from/to, km). If you combine personal and rental tasks, deduct only the rental portion. Save parking receipts.
10) Office, Supplies, and Small Tools
What’s deductible: Stationery, postage, small tools (e.g., hand tools under the small-tool threshold), printer ink, lockboxes, smoke detectors, and other consumables.
Capital caution: Durable equipment with a multi-year life (e.g., commercial-grade tools) may be capital expenditure.
11) Salaries, Wages, and Benefits (If You Employ Staff)
What’s deductible: Gross wages, employer CPP/EI, vacation pay, statutory benefits, and WSIB (if applicable).
How to claim it properly: Set up payroll accounts, remit on time, and retain ROEs and year-end slips.
12) Professional and Accounting Services
What’s deductible: Annual tax preparation, bookkeeping, and advisory related to your rental portfolio.
How to claim it properly: Keep engagement letters and invoices; store related papers with your year-end binder.
13) Bad Debts (Specific)
What’s deductible: Uncollectible rent that was previously included in income.
How to claim it properly: Keep collection notes, demand letters, and proof of attempts to collect before writing it off.
14) Prepaid Expenses and Soft Costs
What’s deductible: Prepaid insurance/utilities that relate to the year; certain soft costs during construction/renovation may need to be capitalized until the property is available for rent.
How to claim it properly: Prorate prepaid items over the coverage period; for construction periods, maintain a work-in-progress record.
15) Capital Cost Allowance (CCA)
What’s deductible: Annual CCA on depreciable property such as buildings, major renovations, furniture/appliances, and equipment—according to their CCA class and rate (for example, many residential buildings fall under Class 1 (4%); most furniture/appliances under Class 8 (20%); many vehicles under Class 10/10.1 (30%); certain zero-emission vehicles use Class 54/55 with separate limits).
Important limitations: You cannot use CCA to create or increase a rental loss. If you converted your principal residence to a rental and made the section 45(2) election to defer the deemed disposition, you cannot claim CCA while that election is in effect.
How to claim it properly: Keep an asset register (cost, date, class, rate, prior CCA, UCC balance, disposition details). Apply the half-year rule where required.
Summary Table — Deductions from Rental Income (How to Claim Them Cleanly)
| # | Deduction Category | What You Can Deduct | Practical Solution (How to Do It Right) | |
| 1 | Mortgage Interest & Bank Charges | Interest on funds used to buy/improve the rental; bank fees tied to rental | Keep loan agreements & monthly statements; separate principal vs interest; trace refinances to the property | |
| 2 | Property Taxes & Municipal Charges | Annual property tax; certain service fees | Keep tax bills & proof of payment; record tenant reimbursements as income | |
| 3 | Insurance (Landlord/Property) | Property & liability premiums; riders | Store policies/invoices; align expense to coverage period | |
| 4 | Utilities & Services | Heat, hydro, water, waste, security you pay as landlord | Record reimbursements as income; use separate meters where possible | |
| 5 | Condominium Fees & Assessments | Monthly condo fees; some assessments | Determine if assessment is current (expense) or capital (add to cost) | |
| 6 | Advertising & Tenant Placement | Online listings, signs, reasonable referral fees | Save invoices/screenshots; link ad periods to leases signed | |
| 7 | Repairs & Maintenance (Current) | Routine fixes restoring original condition | Keep itemized invoices; treat value-adding upgrades as capital | |
| 8 | Management & Professional Fees | Property management, caretakers, accounting, legal for rentals | Keep contracts & timesheets; capitalize acquisition legal fees | |
| 9 | Travel & Vehicle (Management) | Reasonable km to collect rent/oversee repairs | Maintain mileage log; deduct only rental portion; keep parking receipts | |
| 10 | Office, Supplies & Small Tools | Stationery, postage, small tools, smoke detectors | Separate consumables vs capital; keep receipts | |
| 11 | Wages & Benefits (if staff) | Gross wages, employer CPP/EI, WSIB, benefits | Open payroll accounts; remit on time; file T4s | |
| 12 | Professional/Accounting | Tax prep, bookkeeping, rental advisory | Engagement letters + invoices in year-end binder | |
| 13 | Bad Debts (Specific) | Rent you included in income but can’t collect | Document collection attempts; write off when clearly uncollectible | |
| 14 | Prepaid & Soft Costs | Prepaid insurance/utilities; certain construction soft costs | Prorate prepaids; capitalize soft costs until property is rentable | |
| 15 | CCA (Depreciation) | Building, major renos, furniture/appliances, equipment (class rates) | Keep asset register; apply half-year rule; don’t create/increase a loss; check 45(2) election limitation |
Examples of Deductions from Rental Income
- Toronto condo landlord (condo fees & assessments): A downtown owner rented a 1-bedroom unit. Monthly condo fees were fully deductible. A special assessment funded a lobby/amenity upgrade that increased the building’s value—so the proportionate costs have been capitalized, adding it to the building’s cost and claiming CCA going forward.
- Mississauga duplex (owner pays utilities): The landlord paid hydro and water for both units and charged a flat utilities fee in the lease. So, recognized the flat fee as rental income and claimed the full utility bills as expenses. Meter photos and bills were stored with each tenancy file.
- Markham townhouse (repairs vs capital): After a long-term tenant moved out, the owner repainted and repaired drywall (current expense), replaced a broken faucet (current), and upgraded laminate to engineered hardwood throughout (capital). So, expensed the first two and capitalized the flooring upgrade.
- Hamilton student rental (travel & management): The owner lived in Toronto and visited monthly to supervise repairs and collect rent. He kept a mileage log, deducted kilometres and parking for those trips, and excluded weekends where the purpose wasn’t primarily rental management.
FAQs – Tax Write-Offs from Rental Income Canada
1) Can I deduct my full mortgage payment?
No. You can deduct interest and eligible bank charges, but not the principal portion of mortgage payments. Keep statements so the interest amount is easy to verify.
2) Are condo fees deductible for a rental property?
Yes, monthly condo fees are generally deductible against rental income. Special assessments must be reviewed to determine whether they are current (deduct) or capital (add to building cost).
3) What’s the difference between a repair and a capital improvement?
A repair restores the property to its original condition (current expense). A capital improvement adds value or extends useful life (capitalize and claim CCA). Keep detailed invoices and photos to support the classification.
4) Can I write off travel to my rental property?
Yes, reasonable travel to collect rent, supervise repairs, or manage the property can be deductible—especially when the property is in another municipality. Maintain a mileage log and claim only the rental management portion of any trip.
5) Are meals and lodging deductible when I visit the property?
In general, board and lodging are not deductible for routine property visits. Meals for a pure management trip are typically not a rental deduction; keep your claims focused on vehicle km and parking unless you are in very specific circumstances.
6) How does CCA work for rental properties?
CCA lets you deduct a portion of a depreciable asset’s cost each year according to its class and rate (for example, many residential buildings are Class 1 (4%); most furniture/appliances are Class 8 (20%)). You cannot use CCA to create or increase a rental loss.
7) I converted my home to a rental—can I claim CCA on the building?
If you made a change-in-use election to defer the deemed disposition of your principal residence, you generally cannot claim CCA while that election applies. This is a nuanced area—document your choice and get advice from a Toronto tax accountant before claiming CCA.
8) Are long-term residential rents subject to GST/HST?
Long-term residential rent is generally exempt from GST/HST, so you usually cannot claim ITCs on purchase/operating costs. Special rules and potential rebates can apply in certain new-rental situations—seek advice from tax accountant Scarborough for new builds or substantial renovations.
9) Can I deduct legal and accounting fees?
Yes, when they relate to managing the rental (e.g., lease drafting, eviction, tax filing). Acquisition legal fees are usually capitalized to the property’s cost rather than expensed.
10) How do I handle tenant reimbursements for utilities or repairs?
Record the reimbursement as rental income and still claim the full expense. Keep the tenant’s payment receipt or ledger entry with your documents.
11) How long must I keep my rental records?
Keep all records—invoices, receipts, loan documents, mileage logs, and worksheets—for at least six years after the end of the tax year. Digital copies are acceptable if they are clear, complete, and accessible.
12) What forms do I file for rental income?
Report rental income/expenses on Form T776 with your T1 personal return (calendar year). Use a separate T776 for each property.
Consult a Tax Professional Toronto
Great rental results don’t happen at tax time—they’re built with clean records, clear classifications, and consistent processes all year long.
Let’s make it effortless. Book a Free Rental-Tax Review with MAQ CPA accounting firm’s Tax Accountant Toronto. We’ll list your eligible deductions, guide you with a documentation workflow so your next tax filing is accurate, defensible, and optimized.
Disclaimer
The information provided in this blog is for general informational purposes only and does not constitute professional accounting, tax, financial, or legal advice. While we strive to ensure the accuracy and timeliness of the content, the information may not apply to your specific situation or reflect the most current legislative changes. Readers are strongly advised to consult a qualified legal or tax professional before making any decisions based on the content of this blog. MAQ CPA and its representatives disclaim any liability for any loss or damage incurred as a result of reliance on any information provided herein.