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, see Current expenses or capital expenses.

Some expenses your incur are not deductible. For more information see Expenses you cannot deduct.

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

The following is a list of expenses that are deductible:

Advertising

You can usually deduct amounts for advertising that your rental property is available for rent.

Insurance

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

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

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

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

Maintenance and repairs

If you pay for repairs to your property, you can deduct the cost of labour and materials. However, you cannot deduct the value of your own labour.

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.

Prepaid expenses

Prepaid expenses are expenses you pay for ahead of time. Claim any expense you prepay in the year or years in which you get the related benefit.

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, Maria can deduct $700 in the current tax year and $700 in each of the following two years.

Property taxes

You can deduct property tax assessed by a province or territory and by a Canadian municipality that relate to your rental property for the period when it was available for rent. For more information, go to Vacant land and Costs relating to construction, renovation, or alteration.

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 an employer, you can deduct your portion of the following contributions:

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, see Guide T4001, Employers' Guide - Payroll Deductions and Remittances.

Travel

You might travel to collect rents, supervise repairs, and manage your properties. To claim the expenses you incur, you need to meet the same requirements discussed in Motor vehicle expenses.

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

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