Key Points For The Canadian Rental Property And Allowable Deductions
March 15, 2021 | Written by: Sohail Afzal
If you own a rental property in Canada and receive rental income, you will need to complete Form T776, i.e., Statement of Real Estate Rentals. This form will help you calculate your rental income and expenses to be reported in your tax return. There are a few deductible expenses that are associated with your rental income and you can deduct those expenses to calculate your net rental income. The amount of net rental income will be included in the list of total income. The higher the amount of net rental income, the higher the taxable income will be.
If you have a low amount of deductibles and other federal and provincial tax credits, you will end up in a high tax bracket, which means you will have to pay high personal taxes to the CRA. Property rental income has the following deductibles that can reduce your rental income and thereby reduce your taxable income:
- Mortgage Interest
- Property Taxes
- Property Insurance
- Repair & Maintenance Costs
- Advertising Costs
- Property Management Fees
If you experience a rental loss in a given year and that loss exceeds income from other sources, you will incur a non-capital loss that you can carry forward to reduce taxable income for the following year. Keep in mind that if you are only renting part of your property, you are not allowed to deduct the full amount of the aforementioned expenses. Any cost you incur for the rental portion of your property will be 100% deductible while property taxes and insurance fees will be partially deductible.
You can split these expenses by apportioning them with the total square footage of your property. Moreover, capital cost allowance can also be claimed, but it should not be used to increase the rental loss. Motor vehicle expenses incurred to collect rent are not allowable deductions, but if you have more than one property and use your vehicle to collect rent from different locations, you can claim your vehicle expenses.
If you have a foreign rental property with a value of more than $ 100,000, you need to complete Form T1135, i.e. Foreign Income Verification Statement. If you are unsure of how to report property income or how to complete CRA rental property forms, please do not hesitate to contact us at GTA Accounting. We will analyze your situation from a tax perspective and prepare your personal taxes, making sure to report all allowable deductions and not to miss out on claiming any federal/provincial tax credits for you.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.