Rental expenses you cannot deduct
On this page, you will find information on the following:
Land transfer taxes
You cannot deduct land transfer taxes you paid when you bought your property. Add these amounts to the cost of the property.
Mortgage principal
You cannot deduct the repayments of principal on your mortgage or loan on your rental property. For information about the interest part of your mortgage, go to Line 8710 – Interest and bank charges.
Penalties
You cannot deduct any penalties shown on your notice of assessment or notice of reassessment.
Value of your own labour
You cannot deduct the value of your own services or labour.
Personal portion of expenses
If you rent part of the building where you live, you can claim the amount of your expenses that relate to the rented area of the building. You have to divide the expenses that relate to the whole property between your personal part and the rented area. You can split the expenses using square metres or the number of rooms you are renting in the building.
For example, if you rent 4 rooms of your 10-room house, you can deduct:
- 100% of the expenses that relate only to the rented rooms, such as repairs and maintenance of the rooms; plus
- 40% (4 out of 10 rooms) of the expenses that relate to the whole building, such as taxes and insurance
If you rent rooms in your home to a lodger or roommate, you can claim all of the expenses for the part you are renting. You can also claim a portion of the expenses for the rooms in your home that you are not renting and that both you and your lodger or roommate use. You can use factors such as availability for use or the number of persons sharing the room to calculate the allowable expenses. You can also calculate these amounts by estimating the percentage of time the lodger or roommate spends in these rooms (for example, the kitchen and living room).
Fill in "Part 4 – Expenses" on Form T776 as follows:
- enter the full amount of each expense under "Total expenses"
- enter the part of each expense that was for personal use under "Personal portion of total expenses"
- add up the amounts in each column and enter the result for "Total expenses" on amount A, and enter the "Personal portion of total expenses" on line 9949
If you are a co-owner or member of a partnership, enter the personal portion of the expenses for all co-owners or partners on line 9949.
You cannot claim the expenses for renting part of your property if you have no reasonable expectation of making a profit.
For more information on renting part of your personal residence, go to Changing part of your principal residence to a rental property or vice versa.
Example
Patrick rents out 3 rooms of his 12-room house. He is not sure how to split the expenses when he reports his rental income. His expenses were property taxes, electricity, insurance and the cost of advertising for tenants in the local newspaper.
Patrick can claim the part of his expenses that relate to the area of the property he rented in the current tax year. Since he rented 25% of his residence (3 out of 12 rooms), he can deduct 25% of his property taxes, electricity, and insurance costs from his rental income. He can deduct the full amount of the advertising expense, since this expense relates only to the rented area.
When he completes Form T776, Patrick enters the full amount of each expense in the “Total expenses” column. Then, in the “Personal portion” column, he shows the part of each expense that relates to his personal use. In this case, he enters 75% of the property taxes, electricity and insurance costs for the property. He will not enter anything for advertising in the “Personal portion” column.
Patrick can also claim capital cost allowance (CCA) on the rented area of the property if it does not create or increase a rental loss and he is not designating the building as his principal residence.
Short-term rental portion of total expenses
If you earn income from a short-term rental, you can deduct expenses that relate to your short-term rental unless they are a non-compliant amount.
To calculate the part of expenses you cannot deduct from your income, fill in "Part 4 – Expenses" on Form T776 as follows:
- enter the part of each expense related to residential properties that were short-term rentals at any time during the year under "Short-term rental portion of total expenses"
- add up the amounts in that column and enter the result on line 9365, "Total for short-term rental portion"
- fill in "Chart A – Non-compliant amount of expenses for short-term rentals" on Form T776
- enter amount B from Chart A on line 9366, "Non-compliant amount of expenses for short-term rentals"
Line 9366 – Non-compliant amount of expenses for short-term rentals
You cannot deduct the non-compliant amount of expenses related to non-compliant short-term rentals. Fill in "Chart A – Non-compliant amount of expenses for short-term rentals" on the form. This chart will help you calculate your non-compliant amount of expenses. Here is an example on how to fill in Chart A:
Example
In 2024, Kevin had three short-term rentals:
- rental 1, which he rented for 84 days
- rental 2, which he rented for 35 days
- rental 3, which he rented for 14 days
Rental 2 is one of two units within one residential property. The other unit in that residential property is a long-term rental and is therefore excluded from Chart A. Both rental 1 and rental 3 are residential properties with only one unit each.
Kevin registered to operate rental 1 with the province or municipality halfway through the 84-day period. He did not register to operate rental 2 as a short-term rental with the province or municipality. He registered rental 3 from the start of the rental period.
Kevin determines that rental 1 was a non-compliant short-term rental for 42 days, rental 2 was a non-compliant short-term rental during the entire rental period and rental 3 was a compliant short-term rental the entire rental period.
If a short-term rental is compliant with all applicable requirements by December 31, 2024, the short-term rental is considered compliant for the entire 2024 tax year. This rule only applies for 2024.
Since rental 1 and rental 3 were compliant with all applicable requirements by December 31, 2024, they are both considered compliant short-term rentals for the entire year. Therefore, the number of days rental 1 and rental 3 were non-compliant short-term rentals is zero.
Kevin has a total short-term rental expense portion of $4,300, which he enters on line 9365.
To calculate his non-compliant amount of expenses, Kevin divides the total short-term rental expense portion, $4,300, between each of his short-term rentals and enters the following in Chart A:
| 1 Rental property address |
2 Unit number |
3 Related portion of the total from line 9365 of Part 4 |
4 Number of days the residential property was a non-compliant short-term rental |
5 Number of days the residential property was a short-term rental |
6 Non-compliant amount |
|---|---|---|---|---|---|
| Rental 1 address | $2,100 | 0 | 84 | $0 | |
| Rental 2 address | 1 | $1,500 | 35 | 35 | $1,500 |
| Rental 3 address | $700 | 0 | 14 | $0 |
To calculate the non-compliant amount at column 6, Kevin multiplies the amount from column 3 by the amount in column 4, divided by the amount in column 5.
Kevin then adds the amounts from column 6 and enters the total, $1,500, on line 9366, "Non-compliant amount of expenses for short-term rentals," in Part 4 of Form T776.
Line 9367 – Non-compliant amount of capital cost allowance (CCA) for short-term rentals
You cannot deduct the non-compliant amount of CCA related to non-compliant short-term rentals. Fill in Chart B – Non-compliant amount of CCA for short-term rentals on the form. This chart will help you calculate your non-compliant amount of CCA.
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