Rental income and expenses are reported on Form T776, Statement of Real Estate Rentals, which feeds into your T1. You report the gross rent you received and deduct the expenses of earning it — the difference is what you are taxed on.
What you can deduct
The ordinary running costs: mortgage interest (the interest, not the principal), property tax, utilities you pay, condo fees, home protection premiums on the property, advertising for tenants, professional fees, and repairs and maintenance.
If you rent out part of a property you also live in, expenses are split between personal and rental use on a reasonable basis — usually floor area, sometimes number of rooms. The basis you pick needs to be defensible and used consistently.
Current versus capital: the distinction that matters most
A current expense maintains the property in the condition it was in. A capital expense improves it beyond that, or replaces something with a better version of it.
Repainting a wall is current and deductible this year. Replacing the roof, or putting in a new kitchen, is capital — it gets added to the cost of the building and written off over years through capital cost allowance.
The line is not always obvious, and getting it wrong in either direction costs money. Treating a capital cost as current overstates this year's deduction; the reverse leaves a deduction on the table.
Capital cost allowance is optional, and often declined
You may claim depreciation on the building through capital cost allowance, but you do not have to — and it cannot be used to create or increase a rental loss.
Many owners choose not to claim it. Depreciation taken reduces the building's cost base, which means it comes back as recaptured income when the property is sold. Whether to claim it is a question about your plans for the property, not a bookkeeping default.
Add a property and the same return covers it — the additional work is another column, not another return.
Sources
- CRA — Rental Income guide (T4036) — modified 27 March 2026
This guide explains published CRA rules. It is general information, not advice about your situation. Rules change — check the CRA page before acting on anything here.
