Tax Deductions Every Canadian Landlord Should Know

How Rental Income Is Taxed in Canada

In Canada, rental income is added to your other income and taxed at your marginal tax rate. But here's the key: you only pay tax on your net rental income, which is gross rent minus eligible expenses.

You report rental income and expenses on Form T776, Statement of Real Estate Rentals. If you own property with someone else, each person reports their share based on ownership percentage.

The more legitimate expenses you can claim, the less tax you pay. Let's go through everything you're entitled to deduct.

Common Deductible Expenses

1. Mortgage Interest

This is usually the biggest deduction. You can deduct the interest portion of your mortgage payments, but not the principal. Your lender provides an annual statement showing the breakdown.

If you refinanced to pull out equity for personal use, only the interest on the original mortgage amount (or amount used for the rental property) is deductible.

2. Property Taxes

Municipal property taxes are fully deductible against rental income. This is straightforward. Keep your tax bills as proof.

3. Insurance

Premiums for your rental property insurance are deductible. This includes:

• Fire and theft insurance
• Liability insurance
• Flood insurance
• Landlord-specific coverage

4. Repairs and Maintenance

This is where many landlords leave money on the table. Current expenses (repairs that restore the property to its original condition) are fully deductible in the year you incur them:

• Fixing a leaky faucet
• Repainting walls
• Replacing broken windows
• Repairing appliances
• Pest control
• Snow removal and lawn care

Important distinction: Improvements that add value or extend the life of the property (new roof, new furnace, kitchen renovation) are capital expenses. These aren't deducted all at once. Instead, they're claimed over several years through Capital Cost Allowance (CCA).

5. Utilities

If you pay any utilities for the rental property, they're deductible:

• Electricity
• Gas/heating
• Water
• Internet (if included in the rental agreement)

Pro tip: If you're paying utilities on behalf of tenants, consider submetering. Companies like Axis Meter Solutions install individual meters for each unit so tenants pay their own usage. This shifts utility costs off your books entirely, which can save thousands per year on a multi-unit building. The installation and service fees are also tax-deductible as a property expense.

6. Advertising

Costs to find tenants are deductible:

• Online listing fees
• Newspaper ads
• Signage
• Tenant screening service fees

7. Professional Fees

• Accounting fees for preparing your tax return
• Legal fees for lease preparation, evictions, or tenant disputes
• Property management fees if you hire a manager

8. Travel Expenses

If you travel to your rental property for maintenance, inspections, or tenant meetings, you can claim:

• Vehicle expenses (gas, maintenance, insurance) based on the percentage of kilometres driven for rental purposes
• Alternatively, use the CRA's per-kilometre rate

Keep a mileage log. The CRA can and does ask for proof.

9. Office Expenses

If you manage your rental from a home office:

• A portion of your home expenses (proportional to the space used)
• Office supplies, postage, phone expenses related to the rental

Be reasonable with these claims. The CRA knows the difference between a legitimate home office and someone trying to write off their entire house.

Capital Cost Allowance (CCA)

CCA lets you deduct the cost of the building and major improvements over time. The rental building itself falls under Class 1 (4% per year).

A few important CCA rules:

• You can only claim CCA to reduce rental income to zero. You can't use it to create or increase a rental loss.
• Land is not depreciable. You need to separate the cost of land from the building.
• The half-year rule applies. In the first year, you can only claim CCA on half the net addition.
• When you sell, you may have to recapture CCA, which means the amounts you claimed get added back to your income.

CCA is optional. You don't have to claim it. Some landlords choose not to, because recapture on sale can create a significant tax hit. Talk to your accountant about what makes sense for your situation.

Expenses You Cannot Deduct

Not everything is deductible. Watch out for these:

• Mortgage principal payments (only interest is deductible)
• Personal expenses unrelated to the rental
• Land transfer tax paid when you purchased the property (this gets added to the cost base)
• The value of your own labour on repairs
• Penalties and fines

Record Keeping: Your Best Friend

The CRA requires you to keep rental records for at least 6 years after the tax year they relate to. Keep:

• All receipts for expenses claimed
• Bank and credit card statements
• Lease agreements
• Mortgage statements showing interest paid
• Property tax bills
• Mileage logs

A tool like BricksAbove can help you track expenses throughout the year, so you're not scrambling at tax time. When every expense is logged and categorized as it happens, tax preparation becomes a simple export rather than a weekend-long project. Check out our pricing to find a plan that fits.

Working with an Accountant

If you own rental property, working with an accountant who specializes in real estate is worth every penny. They can help you:

• Maximize deductions you might miss
• Navigate CCA decisions strategically
• Structure ownership for tax efficiency
• Plan for the tax implications of selling

The cost of the accountant? Also deductible.

Want to see how your property stacks up financially? Our free cash flow calculator lets you plug in your income and expenses to see your true monthly returns. It works as a comprehensive rental income calculator that accounts for vacancy, maintenance reserves, and operating costs.

Final Tip

Don't wait until April to think about taxes. Track your expenses throughout the year. Categorize them as you go. Keep your receipts organized digitally. Your future self (and your accountant) will thank you.