25 Jun 2025
News
Maximizing Your Rental Property Tax Deductions
Owning a rental property can be a great source of secondary income, however it comes with the responsibility of various tax obligations. Landlords must ensure income is accurately reported to ensure compliance with the Canada Revenue Agency (CRA), whilst also taking advantage of tax available tax deductions to maximize savings. Below are useful tips to prepare you for your rental property tax return in 2026.
Reporting Rental Income
The CRA requires all rental income to be reported, including:
- Regular rent payments
- Advance rent payments
- Non-refundable deposits
- Payments for extras such as parking, storage, or utilities
To report rental income, landlords must use Form T776 – Statement of Real Estate Rentals, and report rental income under the “Other Income” section on your T1 General Income Tax return. It is essential to keep detailed records of receipts, invoices, and lease agreements, should the CRA require any additional information to support your claim.
Deducting Expenses
Rental property owners are able to claim a range of expenses to reduce taxable rental income, provided the costs are directly connecting to generating rental income and supported by proper documentation. Such expenses usually fall into two main categories – current expenses and capital expenses.
Current Expenses
Current expenses are routine costs that maintain the property, but do not boost long-term property value. Examples may include:
- Mortgage interest
- Property taxes
- Utilities (if paid by the landlord)
- Insurance premiums
- Maintenance and minor repairs
- Advertising costs
- Professional services
- Travel expenses
You can see a full list of expenses you can deduct here.
Capital Expenses
Capital expenses are investments that improve or extend the life of the property, upgrading the home and increasing its value. These expenses are gradually using Capital Cost Allowance (CCA), you can see an example of the CCA calculation here. Common examples of capital expenses include:
- Renovations and upgrades (e.g., bathroom remodels)
- New appliances or HVAC systems
- Roof or window replacements.
It is important to distinguish between property repairs that would full under current expenses (fully deductible), and property improvements which would fall under capital improvements (deductible over time). You can see examples of the differences here.
Short-Term Rentals
If you rent your property for short-term stays through platforms such as Airbnb or Vrbo, there are additional considerations to be aware of. All income must be reported, even for short-term stays. GST/HST registration is mandatory if rental revenue exceeds $30,000 annually. It is important to ensure your property is located in a municipality that permits short-term rental to operate, and complies with all applicable registration, licensing, and permit requirements for operating a short-term rental in your municipality. Failure to do so will result in denial on tax deductions related to your property and a non-compliance penalty.
VIRANI RENT + MANAGE is a dedicated division to service rental and property management for our clients. Visit our RENT + MANAGE page for more information.
