Short Answer
Rental income is reported on Form T776, which separates gross rents from eligible expenses to calculate the net amount taxable. Filing accurately requires organizing records annually and understanding the difference between deductible expenses and capital improvements.
Step 1: Calculate Gross Rental Income
Start with total rents received during the calendar year (January 1 – December 31):
| Income source | Include? |
|---|---|
| Monthly rent payments received | Yes |
| First and last month upfront (received this year) | Yes |
| Damage deposit you kept this year | Yes |
| Parking, storage, laundry revenue | Yes |
| Damage deposit held (not yet applied) | No |
| Loan to tenant (not rent) | No |
Cash basis: Most Canadian landlords use the cash basis — income is included in the year received regardless of when it is “earned.” Expenses are deducted in the year paid.
Step 2: Gather Deductible Expenses
Collect receipts and records for all eligible expenses paid during the year:
| Expense category | What to collect |
|---|---|
| Mortgage interest | Year-end mortgage statement showing interest paid |
| Property taxes | Property tax bill or municipal receipt |
| Insurance | Annual renewal statement |
| Maintenance and repairs | All receipts — contractor invoices, hardware store receipts |
| Utilities | Hydro, gas, water bills paid on behalf of units |
| Property management | Monthly statements or annual summary from management company |
| Advertising | Rental listing receipts, signage |
| Legal and accounting fees | Lawyer invoices for lease disputes, accountant fee for T776 |
| Travel | Log of trips to property for inspection/repair (date, km, purpose) |
Step 3: Complete Form T776
Part 1: Rental Income
| T776 line | Enter |
|---|---|
| Line 8141 | Gross rents received |
| Line 8299 | Total income |
Part 2: Operating Expenses
| T776 line | Expense type |
|---|---|
| 8340 | Advertising |
| 8360 | Insurance |
| 8430 | Interest (mortgage interest) |
| 8450 | Office expenses |
| 8480 | Legal, accounting, professional fees |
| 8500 | Management and administration fees |
| 8520 | Motor vehicle expenses |
| 8550 | Travel expenses |
| 8600 | Salaries and wages (if you employ a superintendent/manager) |
| 8690 | Property taxes |
| 8810 | Repairs and maintenance |
| 8860 | Other expenses (itemize) |
| 9180 | Capital cost allowance (from CCA schedule) |
Part 3: Net Income Calculation
| Step | Calculation |
|---|---|
| Gross income (line 8299) | $________ |
| Minus total expenses (sum of above) | $________ |
| = Net income before CCA | $________ |
| Minus CCA (optional, cannot create loss) | $________ |
| = Net rental income/loss (line 9946) | $________ |
Step 4: Transfer Net Income to T1
| Form | Line | Amount |
|---|---|---|
| T1 General | 12600 | Net rental income (or loss) from all T776s |
Rental income is added to your total income and taxed at your marginal rate. A rental loss reduces your total income.
If You Have Multiple Properties
If you own more than one rental property:
- Complete a separate T776 for each property
- Each T776 calculates its own net income/loss
- All net amounts from all T776s are combined and entered at line 12600
Partial-Year Rental
If you rented only part of the year (seasonal rental, moved in mid-year, purchased mid-year):
- Report only the income received during the rental period
- Prorate expenses proportionally to the rental period
- Document clearly which months were rented vs personal use
Common Mistakes on T776
| Mistake | Consequence |
|---|---|
| Claiming principal repayment as interest | CRA will disallow the overstated deduction |
| Claiming 100% of expenses on a partially personal-use property | CRA will reassess the personal-use percentage |
| Omitting first/last month rent received in the year | Underreporting income — audit risk |
| Confusing capital improvements with repairs | Capital improvements cannot be expensed; must be added to ACB |
| Not keeping receipts | CRA audits require receipts; unsubstantiated expenses are disallowed |
| Forgetting to file T776 | Omitted rental income can result in CRA reassessment plus interest and penalties |
Bottom Line
T776 is straightforward once your records are organized. Track gross rents and all expenses through the year, keep every receipt, and distinguish repairs from improvements. The biggest risk for most landlords is a CRA audit triggered by inconsistent or poorly documented expenses — organized records make audits manageable.
Capital Cost Allowance (CCA) on rental property
CCA is optional depreciation you can claim on the building (not land) to reduce rental income. The most common class is Class 1 (4% declining balance) for residential buildings.
Important rules:
- CCA cannot create or increase a rental loss — you can only claim enough CCA to bring net rental income to $0
- When you sell the property, any CCA claimed creates recaptured CCA (taxed as income) or, if the sale price exceeds undepreciated capital cost, may result in a terminal loss
- For most small landlords, claiming CCA increases the tax complexity at sale without enough benefit to justify it — consult an accountant before claiming
CCA is claimed on Schedule 8 of your T1 return, with the amount then carried to T776 line 9180.
Related Reading
- Rental Income Tax Calculator Canada | Landlord Tax Guide
- T3 Slip Explained: Trust Income and How to Report It (2026)
- Complete Canadian Tax Guide for Beginners 2026 | How Taxes Work
→ Back to: Complete Canadian Tax Guide