How Rental Income Is Taxed in Canada (Form T776)

Report rental income on Form T776 and deduct reasonable expenses you paid to earn it, such as property taxes, insurance, interest and utilities for the rented space. Repairs that restore the property are deducted in the year; improvements are claimed over several years through capital cost allowance.

By Sarah Moglin Fact-checked by Samuel Athur

Last verified November 8, 2026 How we check our facts

Current vs capital expenses

Recurring costs with a short-term benefit (like routine repairs that restore the property) are deducted in the year. Costs that buy or improve the property are capital and claimed over time through capital cost allowance. Prepaid expenses are claimed in the years they relate to.

Renting part of your home

Costs that only relate to the rented area are fully deductible. Shared costs are split on a reasonable basis, such as floor area or number of rooms. Example from the CRA: renting 3 of 12 rooms allows 25% of property taxes, electricity and insurance.

What you can't deduct

The value of your own labour, and land transfer tax paid when you bought the property (add it to the property's cost instead).

Losses

If you incurred the expenses to earn income, a rental loss can reduce your other income. Non-compliant short-term rentals have restricted deductions.

Capital Gains Tax in Canada: How It Works Only half of a capital gain is taxable: one-half of the gain is added to your income and taxed at your normal rate. The proposed increase to two-thirds was cancelled. Gains on a home that was your principal residence for every year you owned it remain tax-free. Is Mortgage Interest Tax Deductible in Canada? Not on the home you live in. The CRA only lets you claim interest on money borrowed to earn income: for a rental property (on Form T776), a business, or investments that can pay interest or dividends (line 22100). A mortgage on your own home isn't used to earn income. Can You Claim Property Taxes on Your Tax Return? Property tax on your own home is not a federal deduction, but some provinces give credits for it. In Ontario, you claim property tax (or rent) through the Ontario Trillium Benefit by completing Form ON-BEN with your tax return. Property tax on a rental property is a rental expense.

Sources

Completing Form T776 (CRA) (canada.ca)
Rental expenses you can deduct (CRA) (canada.ca)

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