Deductible Rental Expenses for Ontario Landlords: What You Can Claim

If you rent out a house, condo or part of your home in Ontario, the income is taxable, but many of the costs of earning it can be claimed against it. The hard part is usually knowing which costs count and when.

This article walks through the main categories: everyday expenses, capital costs and CCA, and the situations where the usual rules change. Your own facts matter, so an accountant can confirm how this applies to your return.

How rental income is reported

The CRA encourages landlords to report rental income and expenses on Form T776, Statement of Real Estate Rentals, although it also accepts other financial statements.

All rental properties have a December 31 year-end, so you report rental income for the calendar year, January 1 to December 31.

Current expenses you can usually deduct

Current expenses are recurring costs with a short-term benefit. They can usually be deducted in the year you incur them. Common examples include the following.

• Interest on money borrowed to buy or improve the rental property.
• Insurance premiums paid on the rental property for the current year.
• Property taxes, for the period the property was available for rent.
• Labour and materials for minor repairs and maintenance.

There is one catch on repairs: you cannot deduct the value of your own labour.

Capital expenses and CCA

Capital expenses give a benefit over several years. They are generally not deducted all at once but recovered over time through capital cost allowance (CCA).

Land is not depreciable property, so you can claim CCA on the building but not on the land. Class 1 covers most buildings acquired after 1987, unless they belong to another class, and the Class 1 CCA rate is 4%.

CCA also has a limit: it cannot be used to create or increase a rental loss.

Situations where the rules change

• Renting to a relative below market rent: if expenses keep exceeding the rent, the CRA treats it as a cost-sharing arrangement and no rental loss can be claimed.
• Renting part of your own home: only the expenses for the rented area can be claimed, and shared costs such as property taxes and insurance are split by floor area or by number of rooms.
• Co-owners: each co-owner enters only their own share of the CCA.
• Turning a principal residence into a rental: the owner can elect not to be treated as having started to use it as a rental property, which avoids a deemed sale.
• Non-compliant short-term rentals: from January 1, 2024, deductions, including CCA and interest, are denied for a short-term rental that is not allowed at its location or does not meet provincial or municipal registration, licensing or permit rules, and the denied portion is prorated by the number of non-compliant days.

For 2024 only, a short-term rental that was compliant by December 31, 2024 is deemed compliant for the whole 2024 tax year. Licensing and registration rules vary by municipality, so check what applies where your property is.

What to do next

• Collect records of rent received and every cost tied to the property for the calendar year.
• Sort each cost into current expenses or capital costs before you file.
• If you rent part of your home or co-own, work out your share before claiming anything.
• If you offer short-term stays, confirm your municipal licence or registration is in place.
• Ask an accountant or lawyer about any cost you are unsure how to classify.

Frequently asked questions