📄 Reporting Rental Income (T776)
All rental income in Canada is reported using Form T776 — Statement of Real Estate Rentals. Here's how it works:
- Form T776 is attached to your T1 personal tax return.
- Report your gross rental income — the total rent collected before expenses.
- Claim all eligible expenses against that income.
- The resulting net rental income (or loss) is added to your total income on your T1.
You need a separate T776 for each rental property, or you can report multiple properties on the same form if they're in the same location.
💰 Allowable Rental Expenses
You can deduct reasonable expenses incurred to earn rental income. Common deductible expenses include:
- Property insurance — Premiums for your rental property
- Property tax — Municipal property taxes
- Mortgage interest — Only the interest portion, not principal repayments
- Repairs and maintenance — Fixing what's broken (not improvements or upgrades)
- Advertising for tenants — Online listings, newspaper ads, signage
- Utilities — If the landlord pays (heat, electricity, water, internet)
- Property management fees — Fees paid to a property manager
- Legal and accounting fees — Related to the rental operation
- Travel to rental property — Mileage or transportation costs for property management
- Office supplies — For managing the rental business
Keep all receipts and records — CRA can request documentation for up to 6 years after filing.
🏗️ Capital Cost Allowance (CCA)
Capital Cost Allowance lets you deduct the cost of your rental building over time, rather than all at once:
- Class 1 — 4% declining balance: Most residential rental buildings fall into this class.
- Cannot create or increase a rental loss: CCA can only be used to reduce rental income to zero — it cannot push you into a loss position.
- Principal residence caution: Claiming CCA on a property that was (or may become) your principal residence can affect your principal residence exemption when you sell.
- Land is not depreciable: Only the building portion qualifies for CCA. You must separate the land value from the building value.
- Track your UCC carefully: The undepreciated capital cost (UCC) is your running balance for CCA calculations. Errors compound over time.
CCA is optional — you can choose not to claim it in any given year. This can be strategic, especially if you have little rental income.
🏠 Short-Term Rentals (Airbnb, VRBO)
Operating a short-term rental has additional tax considerations beyond standard landlord obligations:
- Same income reporting rules: All short-term rental income must be reported on Form T776, just like long-term rentals.
- GST/HST registration: If your annual short-term rental revenue exceeds $30,000, you must register for and charge GST/HST.
- Platform reporting since 2024: Airbnb, VRBO, and other platforms now report your earnings directly to CRA. Underreporting will be flagged.
- Municipal regulations: Many cities have bylaws restricting short-term rentals. Non-compliance can result in fines.
- Part-time use rules: If you also use the property personally, expenses must be allocated between personal and rental use periods.
👥 Co-Ownership and Income Splitting
If you co-own a rental property, there are strict rules about how income is reported:
- Report based on ownership percentage: If you own 50% of the property, you report 50% of the net rental income — regardless of who manages the property.
- Joint ownership: Each co-owner files their own T776 showing their share of income and expenses.
- No arbitrary income assignment: You cannot assign a larger share of rental income to a lower-income spouse to reduce overall tax. CRA's attribution rules prevent this.
📉 Rental Losses
Rental losses in Canada can be beneficial for your overall tax situation, but there are important limitations:
- Can offset other income: Unlike some other countries, Canadian rental losses can be used to reduce your employment, business, or other income.
- CCA limitation: Capital Cost Allowance cannot be used to create or increase a rental loss. CCA can only reduce rental income to zero.
- Reasonable expectation of profit: CRA may deny rental losses if there's no reasonable expectation that the property will generate a profit. The property must be operated commercially.
- Consistent losses trigger review: If you report rental losses year after year, expect CRA to review your rental operation.
❓ Frequently Asked Questions
Do I need to charge HST on rent?
Long-term residential rent (1 month or more) is exempt from HST. Short-term rentals (less than 1 month) are different — if your annual short-term rental revenue exceeds $30,000, you must register for and charge GST/HST on those rentals.
Can I deduct renovations?
Repairs that maintain the property's current condition (fixing a leaky roof, repainting, replacing a broken appliance) are fully deductible as current expenses. Improvements that upgrade or add value to the property (new addition, kitchen renovation, new flooring) are capital expenses and must be claimed through CCA over time.
What records do I need?
Keep thorough records including: all expense receipts, lease agreements, mortgage statements showing interest paid, property tax bills, insurance policies, and a detailed log of any personal use of the property. CRA can request these for up to 6 years.
I rented part of my home — how does that work?
Allocate expenses based on the portion of your home that is rented out, typically calculated by square footage. For example, if you rent out 25% of your home's area, you can claim 25% of eligible shared expenses (utilities, insurance, property tax, mortgage interest). Be aware that claiming CCA on the rented portion may affect your principal residence exemption when you sell.
Do I report a security deposit?
Only when you keep the deposit because a tenant forfeits it (e.g., for damages or breaking the lease). Refundable deposits that you're holding in trust are not income and don't need to be reported.
Use our Tax Calculator to estimate your rental income tax, check the Tax Checklist for required documents, or explore our guides on self-employed taxes, personal tax filing, and tax planning strategies.