Reporting real estate income and expenses
Your tax obligations when you rent out real estate
When you rent out property, you must report the income on your tax return, and you can also deduct related expenses. To determine income and expense amounts, there are a number of details to consider.
Income earned from renting out property can be considered rental income or business income depending on the duration and the types of services included in the rental agreement.
Which expenses to deduct and when to deduct them
Keep track of all your expenses related to your rental property as these may be deductible. You can claim some expenses entirely for the year you made them in. Other expenses can be amortized, or spread out, over several years.
Expenses you can claim in full for the same year are:
- current or operating expenses which are short-term expenses associated with maintaining a property.
Expenses you need to claim over several years are:
- capital expenses which generally provide a longer-lasting benefit or improve the value of a property.
For a detailed explanation of expenses, go to Current expenses or capital expenses?
Other considerations when earning rental income
In addition to claiming your income and deducting allowable expenses, there are other considerations that could impact your tax situation.
GST/HST new residential rental property rebate
If you own a newly constructed or substantially renovated residential rental property, you may be eligible for a rebate. Find out more at GST/HST new residential property rebate.
Multiple owners and partnerships
If you share ownership of your property with others, you may be in a co-owner relationship or a partnership. To find out how these situations affect how you report your real estate rental income, go to Ownership.
If you rent out all or part of your primary residence, it may affect your principal residence exemption when you decide to sell. To find out more, see section 8 in Reporting the sale of your principal residence for individuals.
If the expenses you incur to earn rental income are more than your gross rental income, you can deduct your rental loss against your other sources of income. However, you cannot deduct any amortization/depreciation on your rental property if you are already in a rental loss position. You also cannot deduct a rental loss if you rent to a family member below fair market value.
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