Other rental expenses
On this page, you will find information on the following:
On line 9270, include the total amount of other expenses you incur to earn rental income, as long as you did not include them on a previous line.
You can deduct the cost of landscaping the grounds around your rental property only in the year you paid the cost, even if you use the accrual method for calculating your rental income.
Lease cancellation payments
You can deduct amounts paid or payable to tenants to cancel their lease.
The amount of the lease cancellation payment you can deduct depends on if you made the payment in the year or a previous year.
Calculation of the amount of the cancellation payment you can deduct if you made the payment in the year
Cancellation payment × Number of days to the end of the year when payment is made ÷ Number of days left on the lease
Calculation of the amount of the cancellation payment you can deduct if you made the payment in a previous year
Cancellation payment × Number of days in the year left on the lease ÷ Number of days left on the lease
For this calculation, the life of the lease (including all renewal periods) cannot be longer than 40 years.
Samir, the landlord, paid his tenant $1,000 to cancel a lease on August 18 of the current tax year. The lease was due to expire on December 31 of the next year. When he made the payment, there were 135 days left in the current year and 500 days left on the lease.
For the current tax year, Samir deducts $270, calculated as follows:
$1,000 × ( 135 ÷ 500 ) = $270
For the next year, Samir deducts $730 calculated as follows:
$1,000 × ( 365 ÷ 500 ) = $730
If you dispose of the property, the tax treatment will vary depending on your situation. For more information, go to Interpretation Bulletin IT-359R2, Premiums and Other Amounts With Respect to Leases.
If you earn rental income from a condominium unit, you can deduct the expenses that you would usually deduct from rental income. You can also deduct condominium fees representing your share of the upkeep, repairs, maintenance, and other current expenses of the common property. For more information, go to Interpretation Bulletin IT-304R2, Condominiums.
You might earn rental income from vacant land. You can deduct your operating expenses from this income. However, there are limits on how much you can deduct for:
- interest on money you borrowed to acquire the land, or on an amount payable for the land
- property taxes on the land assessed by a province or territory and a Canadian municipality, including assessments for school taxes and local improvements
The amount you can deduct for these two expenses is limited to the amount of rental income left after you have deducted all other expenses. You cannot create or increase a rental loss, or reduce other sources of income, by claiming a deduction for interest or property taxes. They can be added to the cost of the land. This will decrease your capital gain or increase your capital loss when you dispose of the land.
You cannot deduct your mortgage interest and property taxes for vacant land if you are not earning any income from that land. Also, you cannot add these expenses to the adjusted cost base of your land. In addition, you cannot deduct income taxes, profit taxes, or land transfer taxes you have for the vacant land.
In 2000, Bob bought vacant land as an investment. In the current tax year, he rented the land to a farmer for pasture.
Since Bob is earning income from renting the land, he can deduct all of his allowable expenses against his rental income. If he still has rental income to report, he can deduct the mortgage interest and property taxes to further reduce his rental income. He cannot create or increase a rental loss, or reduce his other sources of income.
If he does not need the full amount of the property taxes and mortgage interest to reduce the remaining rental income to zero, he can add the rest of the amount to the adjusted cost base of the land.
For more information on vacant land, see Interpretation Bulletin IT-153R3, Land Developers – Subdivision and Development Costs and Carrying Charges on Land, and Interpretation Bulletin IT-456R, Capital Property – Some Adjustments to Cost Base, and its Special Release.
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