Canadian rental property owners can deduct a wide range of expenses against rental income, significantly reducing the amount of tax owed each year. This guide covers every major deductible expense, what qualifies and what does not, sourced from CRA T776.
All deductions on this page are sourced from CRA T776 (Statement of Real Estate Rentals), the authoritative CRA guide for rental property income and expenses. Tax rules change with each federal budget. Always verify current rules at Canada.ca and consult a qualified Canadian accountant for your specific situation.
Expenses you can deduct
These expenses are deductible against rental income in the year they are paid, provided they were incurred to earn rental income and are reasonable in the circumstances. Source: CRA T776.
Mortgage interestDeductible
The interest portion of your mortgage payment is deductible. The principal repayment is not. Only interest represents a cost of earning rental income. If you have a blended mortgage payment, you need to separate interest from principal each year. Your lender's annual mortgage statement shows this split.
CRA T776 line 8710 — Interest and bank charges
Property taxesDeductible
Municipal property taxes paid on the rental property are fully deductible in the year paid. If property taxes are collected through your mortgage payment (many lenders collect this way), the deductible amount is the tax actually remitted to the municipality that year, not the amount collected by the lender.
CRA T776 line 8790 — Property taxes
Insurance premiumsDeductible
Landlord insurance premiums for the rental property are deductible. If you prepay insurance, you can only deduct the portion that applies to the current tax year. The remainder is deductible in the following year or years.
CRA T776 line 8690 — Insurance
Property management feesDeductible
Fees paid to a professional property management company are fully deductible. This includes the management fee percentage charged on rents collected. If you self-manage your property, you cannot deduct a management fee for your own time.
CRA T776 line 8810 — Management and administration fees
Repairs and maintenanceDeductible if current expense
Expenses to maintain or restore the property to its original condition are deductible as current expenses. This includes fixing leaks, replacing broken fixtures, repainting, patching drywall and similar work. The key distinction is between a repair (deductible) and a capital improvement (not immediately deductible). See the capital improvements section below.
CRA T776 line 8960 — Repairs and maintenance
Advertising costsDeductible
Costs to advertise the rental unit and find tenants are deductible. This includes online listing fees, signage and newspaper advertising. Reasonable photography costs for the listing may also qualify.
CRA T776 line 8520 — Advertising
Professional feesDeductible
Accounting and legal fees related to the rental property are deductible. This includes the cost of having an accountant prepare your rental income statement, legal fees for lease preparation or tenant disputes, and the cost of tax advice specific to your rental property. Legal fees for purchasing the property are not deductible as a current expense but may be added to the adjusted cost base.
CRA T776 line 8860 — Professional fees
UtilitiesDeductible if you pay them
If you pay utilities on behalf of tenants (heat, electricity, water), those costs are deductible. If the tenant pays their own utilities directly, you cannot deduct them. Some landlords include utilities in the rent, in which case the utility costs are a deductible expense against the rental income.
CRA T776 line 9220 — Utilities
Office expensesDeductible if rental-related
Reasonable office expenses used to manage the rental property are deductible. This includes postage, stationery, printer costs and similar items used specifically for rental management. Personal office expenses are not deductible.
CRA T776 line 8810 — Office expenses
Travel expensesDeductible if directly related
Travel costs to collect rent, supervise repairs or manage the property may be deductible. CRA scrutinizes travel expense claims carefully. You must be able to demonstrate the trip was primarily for rental management purposes. Mileage claims require a vehicle log. Travel costs for inspecting a property you are considering buying are not deductible.
CRA T776 line 9200 — Motor vehicle expenses
Capital Cost Allowance (CCA)Optional, deductible with restrictions
CCA allows you to deduct building depreciation at 4% declining balance per year (Class 1). CCA is optional and cannot be used to create a rental loss. Claiming CCA creates a recapture liability when the property is eventually sold. See the full CCA guide for a detailed explanation of how it works and when claiming it makes sense.
CRA T776 line 9936 — CCA. CRA T4002 — Class 1 rate and half-year rule
Expenses you cannot deduct
These costs are commonly misunderstood as deductible. They are not current expenses and cannot be claimed against rental income in the year paid.
Expense
Why it is not deductible and what to do instead
Mortgage principal
Principal repayment builds equity in the property. It is not a cost of earning income. Only the interest portion is deductible.
Capital improvements
Work that adds value, extends useful life or replaces a major component is a capital expenditure. It is not immediately deductible but may be recovered through CCA over time or added to the adjusted cost base, reducing capital gains when you sell.
Land purchase cost
Land does not depreciate and cannot be claimed as CCA. Only the building portion of the purchase price is eligible for CCA.
Personal portion of mixed expenses
If an expense is partly personal and partly rental-related, only the rental portion is deductible. You must be able to demonstrate a reasonable allocation.
Value of your own labour
If you perform repairs or maintenance yourself, you cannot deduct what you would have paid a contractor. You can only deduct actual cash outlays for materials and hired labour.
Purchase costs
Legal fees, land transfer tax and other costs of purchasing the property are not deductible as current expenses. They are added to the adjusted cost base and reduce the capital gain when you sell.
Losses from a hobby property
CRA may deny rental losses if they determine the property was not operated with a reasonable expectation of profit. Properties used primarily for personal enjoyment with only occasional rental income are particularly at risk.
Repairs vs capital improvements: the most important distinction
This distinction is where most landlords make errors and where CRA most often challenges deductions. The rule is straightforward in principle but requires judgment in practice.
A repair restores the property to its original condition and is fully deductible in the year paid. A capital improvement adds value, extends useful life or replaces a major component and must be capitalized rather than expensed immediately.
Repairs (deductible now)
Fixing a broken window
Patching and repainting walls
Replacing a broken tap or fixture
Repairing a section of damaged flooring
Fixing a leaking roof (patch repair)
Servicing the furnace or appliances
Capital improvements (capitalize)
Adding a room or finishing a basement
Replacing the entire roof
Installing a new furnace or central air
Replacing all the flooring throughout
Replacing all windows in the building
A complete kitchen or bathroom renovation
When in doubt about whether a cost is a repair or a capital improvement, document your reasoning and keep all receipts. CRA auditors look at the nature, extent and cost of the work relative to the value of the property. A $500 repair to a specific section is usually a current expense. A $50,000 project that replaces major components is almost certainly capital.
Record keeping: what to keep and for how long
CRA requires you to keep records and supporting documents for all rental income and expenses. The general rule is to keep records for six years from the end of the tax year they relate to. For capital expenditures, you should keep records for six years after you sell the property, since they affect your adjusted cost base and therefore your capital gain.
For every expense you plan to deduct, keep the original receipt or invoice showing the date, amount, vendor name and description of what was purchased. Bank and credit card statements alone are not sufficient. A cancelled cheque or electronic payment confirmation paired with an invoice is best practice.
Maintain a simple spreadsheet tracking each expense by category matching the CRA T776 line numbers. This makes tax filing significantly easier and puts you in a strong position if CRA ever reviews your return.
Common questions about rental property tax deductions
You can deduct the interest portion of your mortgage payment but not the principal repayment. Only interest is considered a cost of earning rental income. Your lender's annual mortgage statement shows the interest and principal split for the year. This is one of the most commonly misunderstood deductions among new landlords.
No, not immediately. Capital improvements that add value, extend useful life or replace a major component cannot be deducted as a current expense. Instead, they are added to the property's cost and may be recovered over time through Capital Cost Allowance, or they reduce your capital gain when you eventually sell. The distinction between a repair and a capital improvement is important and sometimes requires judgment.
A repair maintains the property in its current condition and is fully deductible in the year paid. A capital improvement adds value, extends useful life or replaces a major component and must be capitalized. Examples of repairs: fixing a broken window, patching drywall, replacing a tap. Examples of capital improvements: adding a room, replacing the entire roof, installing a new furnace. When in doubt, keep detailed records of the work done and consult your accountant.
Yes. Advertising costs to find tenants are deductible, including online listing fees, signage and photography costs for the listing. If you use a real estate agent to find a tenant and pay a finder's fee or leasing commission, that cost is also deductible as an advertising or professional fee.
In most cases, yes. If your allowable rental expenses exceed your rental income for the year, the resulting rental loss can generally be deducted against other sources of income including employment income, subject to CRA's reasonable expectation of profit rules. However, CCA cannot be used to create or increase a rental loss. If CRA determines you did not have a reasonable expectation of profit from the property, they may disallow the loss. This area can be complex and an accountant familiar with rental properties should review your situation if you are consistently reporting rental losses.
CRA requires you to keep records for six years from the end of the tax year they relate to. For capital expenditures, keep records for six years after the year you sell the property, since they affect your adjusted cost base and the capital gain calculation. Keep original receipts and invoices, not just bank statements. A simple expense tracking spreadsheet organized by CRA T776 line number makes tax time significantly easier.
See how deductions affect your actual return
The calculator models mortgage interest deductibility, CCA and rental income tax so you can see the after-tax picture alongside pre-tax cash flow.
This guide is for general informational and educational purposes only and does not constitute tax or financial advice. Tax rules, deduction limits and CRA interpretations change and vary by individual circumstance. All deductions referenced are sourced from CRA T776 as of the date of publication. Always consult a qualified Canadian accountant before filing your rental income return or making decisions based on this information.