Rental expenses you can deduct

You can deduct any reasonable expenses you incur to earn rental income. The two basic types of expenses are current expenses and capital expenses.

For more information on what we consider a current or capital expense, go to Current expenses or capital expenses.

Some expenses you incur are not deductible. For more information, go to Rental expenses you cannot deduct.

If you are modifying a building to accommodate persons with disabilities, buying an older building, or encounter other situations, go to Capital expenses – Special situations.

The following is a list of expenses that are deductible:

Advertising

You can usually deduct expenses for advertising, including advertising in Canadian newspapers and on Canadian television and radio stations. You can also include any amount you paid as a finder's fee.

Insurance

You can deduct the premiums you pay on your rental property for the current year. If your policy gives coverage for more than one year, deduct only the premiums related to the current year.

Deduct the remaining premiums in the year or years to which they relate.

Management and administration fees

You can deduct the amounts paid to a person or a company to manage your property.

You can also deduct amounts paid or payable to agents for collecting rents or finding new tenants.

If you have commissions when selling your rental property, include them as outlays and expenses on Schedule 3, Capital Gains (or Losses), when you report the disposition of your property.

Office expenses

You can deduct the cost of office expenses. These include small items such as pens, pencils, paper clips, stationery, and stamps. Office expenses do not include capital expenditures to acquire capital property such as calculators, filing cabinets, chairs, and a desk. These are capital items.

Prepaid expenses

A prepaid expense is an expense you paid for ahead of time. Under the accrual method of accounting, claim the expense you prepay in the year or years in which you get the related benefit.

Under the cash method of accounting, you cannot deduct a prepaid expense amount (other than for inventory) relating to a tax year that is two or more years after the year the expense is paid. However, you can deduct the part of an amount you paid in a previous year for benefits received in the current tax year. These amounts are deductible as long as you have not previously deducted them. 

Example

Maria paid $2,100 for insurance on her rental property. The insurance was for the current tax year and the two following years. Although she paid the insurance for three years, she can deduct only the part that applies to the current tax year from her gross rental income. Therefore, she can deduct $700 in the current tax year and $700 in each of the following two years.

You can deduct fees for legal services to prepare leases or collect overdue rents.

If you incur legal fees to buy your rental property, you cannot deduct them from your gross rental income. Instead, allocate the fees between land and building, and add them to their respective cost.

Example

You buy a property worth $200,000 ($50,000 for the land and $150,000 for the building) and incur legal fees of $10,000.

Split the $10,000 proportionately between the land and building. In this case, $2,500 is added to the cost of the land (for a total of $52,500) and $7,500 is added to the cost of the building (for a total of $157,500).

Note

The legal fees you paid when selling your rental property are deducted from your proceeds of disposition when calculating your capital gain or capital loss. The deduction for legal fees also applies when calculating a recapture of capital cost allowance or a terminal loss.

You can also deduct expenses you had for bookkeeping services, audits of your records, and preparing financial statements. You may be able to deduct fees and expenses for advice and help to prepare your income tax and benefit return and any related information returns. You can deduct these fees if you needed the help because of your rental operation.

Property taxes

You can deduct property taxes you incurred for your rental property for the period it was available for rent. For more information, go to Vacant land and Construction soft costs.

Repairs and maintenance

You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn income. You cannot deduct the value of your own labour.

You cannot deduct costs you incur for repairs that are capital in nature. However, you can claim capital cost allowance.  

Salaries, wages, and benefits (including employer's contributions)

You can deduct amounts paid or payable to superintendents, maintenance personnel, and others you employ to take care of your rental property. You cannot deduct the value of your own services.

As the employer, you must deduct your part of the following contributions:

You can also deduct workers' compensation amounts payable on employees' remuneration and Provincial Parental Insurance Plan (PPIP) premiums. The PPIP is an income replacement plan for residents of Quebec. For details, contact Revenu Québec.

For more information on making payroll deductions, go to Payroll.  

You can also deduct any insurance premiums you pay for an employee for a sickness, an accident, a disability, or an income insurance plan.

For more information on wages, go to guide T4001, Employers' Guide – Payroll Deductions and Remittances.

Travel

You can deduct travel expenses you incur to collect rents, supervise repairs, and manage your properties.

Travelling expenses include the cost of getting to your rental property, but do not include board and lodging, which we consider to be personal expenses.

To claim the travel expenses you incur, you need to meet the same requirements discussed in Motor vehicle expenses.

Utilities

You can deduct expenses for utilities, such as gas, oil, electricity, water, and cable, if your rental arrangement specifies that you pay for the utilities of your rental space or units.

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