How Rental Property Income Is Taxed in Ontario: A Landlord Guide

Becoming a landlord means you also become a small business reporter in the eyes of the Canada Revenue Agency (CRA). The rent you collect is income, but the costs of earning it can reduce what you are taxed on.

This article walks through how rental income is reported, which costs you can deduct, how depreciation works, and the situations that change the rules. Your own tax result depends on your whole financial picture, so confirm details with an accountant or lawyer.

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 rental income is reported for the calendar year, January 1 to December 31.

In general terms, the net amount, which is your rent minus allowed expenses, is what ends up in your income. How much tax you pay on that net amount depends on your other income and your personal circumstances.

What you can deduct

The key distinction is between current and capital expenses. Current expenses are recurring costs with a short-term benefit and can usually be deducted in the year they are incurred. Capital expenses give a benefit over several years and are generally recovered over time through capital cost allowance (CCA).

• Interest on money borrowed to buy or improve a rental property is deductible.
• Insurance premiums paid on the rental property for the current year are deductible.
• Property taxes are deductible for the period the property was available for rent.
• Labour and materials for minor repairs and maintenance are deductible, but you cannot deduct the value of your own labour.

Keep receipts and records for every item. If you are unsure whether a cost is a repair or an improvement, that is the kind of question worth putting to an accountant.

Capital cost allowance on the building

CCA lets you recover the cost of a building over time. Land is not depreciable property, so CCA can be claimed on the building but not on the land. Class 1 covers most buildings acquired after 1987, unless they belong to another class, and the CCA rate for Class 1 is 4%.

CCA has a limit. It cannot be used to create or increase a rental loss. If you co-own the property, each co-owner enters only their own share of the CCA.

Situations that change the rules

For short-term rentals, a rental that was compliant by December 31, 2024 is deemed compliant for the whole 2024 tax year. Whether a short-term rental is allowed depends on municipal licensing and registration rules, which vary by municipality.

If you live outside Canada, the withheld tax must be remitted to the CRA by the 15th day of the month after the rent is paid or credited, and the payer gives you an NR4 slip. Approved Form NR6 changes the withholding to net rent instead of gross. A separate Section 216 return reports gross rent and taxes only the net rental income, with a general deadline of two years from the end of the year the rent was paid or credited. For NR6 filers it is due much sooner, for example June 30, 2026 for the 2025 return. Residential tenants are not expected to know their landlord's residency or to withhold.

GST/HST and what to do next

Long-term rentals of residential accommodation, meaning one month or more, are exempt from GST/HST. The landlord does not charge it and generally cannot claim input tax credits on related costs. Commercial leases are different, because rentals of commercial real property are taxable. GST/HST must be charged on rooms rented for less than one month, but it is not charged when the same individual rents the room as a residence for a continuous period of one month or more, and units rented for $20 or less per day are exempt whatever the rental period.

• Keep a separate record of rent received and expenses paid for each property.
• Save receipts, loan statements, insurance and property tax bills.
• Separate repairs from improvements before you claim.
• Check whether your short-term rental meets municipal licensing rules.
• If you or a co-owner live outside Canada, confirm withholding and filing deadlines.
• Ask an accountant or lawyer to review your first return.

Frequently asked questions