What rental expenses are tax deductible for Canadian landlords?
Many, but not all of the expenses you incur as a landlord in order to profit from your rental property are tax deductible. Here are some helpful property owner tax tips to keep in mind when you're ready to file.
Tax deductible expenses typically fall into two categories:
- Current expenses: These are recurring costs of running a business. For example, the costs of repairing a rental unit to maintain its condition. This type of expense has a short-term benefit and can be deducted from your gross income under the year they were incurred.
- Capital expenses: These are expenses that have a lasting result, for example purchasing a rental property. In most cases you can’t deduct the entire cost in the taxation year the expense was incurred.
Did you know using Rhenti is tax deductible? Rhenti's tools help you find tenants fast, easily manage multiple renter conversations, and screen detailed renter applications so you can choose the right renter and rest easy.
A guide to the different types of expenses that are tax deductible:
Fees for professional services:
Lawyer and accountant fees are tax deductible, but the way you claim them depends on the circumstance. For example, if you hire a lawyer to evict a tenant or an accountant to do your bookkeeping, that can be deducted from your gross rental income for that year. You can’t claim legal fees from purchasing your rental unit from your gross rental income. These expenses can be divided between your land and the property itself and will be considered part of the cost of the property when calculating capital gains or losses.
Management and administration fees:
Property management fees and fees to agents who have found tenants or collected rent are deductible as a current expense. Commission fees paid to real estate agents when you purchased your rental property can be reported as an expense when you sell the property.
Repairs and maintenance:
Materials and hired labour for repairs to the rental property are considered current expenses, but repair work you personally carry out is not tax deductible. Major renovations to improve the value of your property cannot be claimed as a current expense, but can be claimed under capital costs. The exception to this is if you do renovations to the home to accommodate a tenant who has a disability – this can be claimed as a current expense. Read our complete guide on landlord maintenance obligations.
Travel expenses you incur as a result of managing your property are deductible.
Motor vehicle expenses:
A motor vehicle you use to transport yourself or tools in order to maintain a property can be claimed. Collecting rent from only one property is considered a personal expense and does not make your vehicle tax deductible. If however, you are managing two or more of your rental properties, doing repairs and/or collecting rent, supervising repairs and managing your properties qualifies your vehicle as a tax-deductible expense.
Interest and bank charges:
Interest on the money you’ve borrowed to acquire a rental property can be tax deductible, but there are limitations on what you can claim.
The great news is, using Rhenti to help you find the right-fit renter can be written off as well. Rhenti's rental listing marketing features lists your property on all of the top internet and social listing sites such as Kijiji, View it, Zillow, Hotpads, Facebook, and Google. Also, if you paid someone a referral fee for helping you find a tenant, or you ran any sort of advertisements for your property, those can be claimed as a current expense.
Insurance coverage for the applicable tax year can be claimed as a current expense.
Smaller items like pens and pencils can be deducted as a current expense.
Wages, salaries and benefits:
The wages, salaries and benefits you pay to people you’ve hired to maintain your rental property are deductible, but your own labour is not.
Property taxes during the time your place was available for rent are tax deductible.
If your rental agreement states that you pay for a rental unit’s utilities, this is considered a tax-deductible expense.
Other rental expenses:
The items listed below are considered other tax-deductible rental expenses by the Canada Revenue Agency:
Condo fees related to your current upkeep, repair and maintenance of the unit and common areas.
Landscaping costs related to the year you incurred the expense.
Lease cancellation payments:
Money you paid to tenants to cancel their lease.
Expenses you paid in advance, for example insurance, can be deducted but must be applied only to the tax year for which they are applicable. E.g. If you paid for five years’ worth of insurance, you prorated the cost over a five year period to determine the correct amount to claim for the current tax year.
Vacant land can be rented out and the operating expenses related to renting it out can be deductible, but there are limitations.
The following are not deductible rental expenses:
Land transfer taxes:
Land transfer taxes are not tax deductible and should be considered part of the cost of the property.
Repayments on borrowed money you used to buy the rental property cannot be claimed.
Penalty costs related to notices of assessment or reassessment.
Value of your own labour:
The value of the work you do to maintain your property cannot be claimed as an expense.
Personal portion of expenses:
If you rent out portions of the property you live in, the parts you occupy are not tax deductible.
See why thousands of property owners trust Rhenti and how we earned a 4.9 star rating on Google.
The blog posts on this website are for the purpose of general introductory information. They can’t serve as an opinion or professional advice. Speak to a professional before making decisions related to your circumstances.
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