Rental Income Tax Calculator
How Rental Income Is Taxed
Rental income in Canada is taxed as ordinary income at your marginal tax rate. Net rental income (gross rent minus expenses) is added to your other income and taxed accordingly.
| Taxable Income | Federal + Provincial (ON) | Tax on $10,000 Rental Income |
|---|---|---|
| $50,000 | ~29% | $2,900 |
| $75,000 | ~32% | $3,200 |
| $100,000 | ~37% | $3,700 |
| $150,000 | ~43% | $4,300 |
| $200,000+ | ~53% | $5,300 |
Deductible Rental Expenses
Fully Deductible Expenses
| Expense | Deductible Amount |
|---|---|
| Mortgage interest | 100% (not principal) |
| Property taxes | 100% |
| Insurance | 100% |
| Repairs and maintenance | 100% |
| Advertising for tenants | 100% |
| Legal fees (tenant issues) | 100% |
| Accounting fees | 100% |
| Property management fees | 100% |
| Utilities (if landlord-paid) | 100% |
| Condo fees (maintenance portion) | 100% |
Partially Deductible Expenses
If you rent part of your home:
| Expense | Deduction Method |
|---|---|
| Mortgage interest | % of home rented |
| Property tax | % of home rented |
| Utilities | % of home rented |
| Home insurance | % of home rented |
Example: If you rent your basement (30% of total square footage), you can deduct 30% of shared expenses.
Capital Cost Allowance (CCA)
CCA allows you to deduct depreciation on your rental property:
| Asset | CCA Class | Rate |
|---|---|---|
| Residential building | Class 1 | 4% |
| Furniture and appliances | Class 8 | 20% |
Warning: Claiming CCA on rental property can trigger recapture when you sell, increasing your taxable capital gain. Many landlords choose not to claim CCA.
What You Cannot Deduct
- Mortgage principal payments
- Personal portion of expenses (if part of your home)
- Major improvements (must be capitalized)
- Land value (only building depreciates)
- Your own labour
Reporting Rental Income
Form T776
All rental income and expenses are reported on Form T776 (Statement of Real Estate Rentals). You’ll need:
- Property details - Address, ownership %
- Gross rents - Total rent collected
- Operating expenses - All deductible expenses
- Capital cost allowance - Depreciation claimed
- Net income - Goes on your tax return
Co-Owned Properties
If you co-own a rental property:
- Each owner reports their share of income/expenses
- Usually split by ownership percentage
- Each owner files their own T776
Rental Losses
If your rental expenses exceed your rental income, you have a rental loss. Rental losses can:
- Offset other income (employment, investment)
- Reduce your overall tax bill
- Be carried forward if not used
Reasonable expectation of profit: CRA may deny losses if there’s no reasonable expectation the property will be profitable.
When You Sell
When you sell a rental property, you may owe:
| Tax Type | Applies To |
|---|---|
| Capital gains tax | Property appreciation |
| CCA recapture | Depreciation previously claimed |
Use our Capital Gains Tax Calculator to estimate taxes on the sale.
Principal Residence Exemption
If you rented your principal residence, you may still qualify for a partial exemption. The “plus one” rule allows:
Exempt years = (Years as principal residence + 1) / Total years owned
Tips for Landlords
- Keep detailed records - Save all receipts for at least 6 years
- Separate bank account - Makes tracking income/expenses easier
- Consider CCA carefully - The recapture on sale may not be worth it
- Get a rental-specific accountant - Tax rules are complex
- Review your rent annually - Ensure rent covers expenses + tax