How is rental income from an Ontario property taxed?
Rental income earned from a property in Ontario is reported as income from property on your T1 personal tax return. You include gross rents received and deduct allowable expenses to arrive at net rental income, which is taxed at your marginal rate — federal plus Ontario provincial.
Allowable rental deductions include mortgage interest (not principal repayment), property taxes, insurance, repairs and maintenance, property management fees, advertising, and a reasonable portion of utilities if you pay them. You can also claim Capital Cost Allowance (CCA) — a depreciation deduction — on the building, but doing so can affect tax owing when you sell. Many tax advisors recommend against claiming CCA on rental properties unless there is a strong reason, because it can trigger recapture on sale.
If your rental expenses exceed your rental income, you generally have a net rental loss, which can be used to offset other income on your return (subject to certain rules around non-arms-length transactions and reasonable expectation of profit). Ontario follows the federal rules for rental income, so the same analysis applies at the provincial level. Consulting a tax professional before your first filing season as a landlord can prevent common and costly mistakes.
Key takeaways
- Net rental income (gross rents minus allowable expenses) is taxed at your personal marginal rate.
- Deductible costs include mortgage interest, property tax, insurance, and maintenance — not mortgage principal.
- CCA (building depreciation) is optional but triggers recapture on sale.
- Net rental losses can generally offset other income; consult a professional for your situation.