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You pay rental income tax in Canada on what’s left after expenses, not on the rent you collect. Say you take in $30,000 in rent and spend $14,000 running the place. Your $16,000 of net rental income is added to your other income, and on an $80,000 salary in Ontario that costs about $4,744 more tax.
How is rental income reported?
You fill in form T776, the Statement of Real Estate Rentals, for the calendar year, January 1 to December 31. The CRA’s page on completing form T776 says to put gross rents on line 12599 of your return and the net figure from line 9946 on line 12600. A loss goes in brackets.
The CRA also expects you to know whether you have rental income or a business. Most people with a flat or a basement suite report rent. If you provide extra services on a bigger scale, read the CRA’s pages on rental versus business before you file.
Which expenses can you deduct from the rent?
The rule is reasonable costs you paid to earn the rent. Think of property tax, insurance, repairs and management fees. Mortgage interest counts as well. The CRA’s page on rental expenses you can deduct says you can deduct the interest on money you borrow to buy or improve your rental property, but not interest on money borrowed for personal use. The CRA also draws a line between current expenses, which you deduct in the year, and capital expenses, which you write off slowly through capital cost allowance (CCA).
Two limits catch people. First, a CCA claim can’t create or increase a rental loss. Second, if you rent only part of your home, you split the shared costs. The CRA’s own example is renting 4 rooms out of 10: you claim all of the costs that belong only to those rooms and 40% of the whole-building costs such as taxes and insurance.
And the CRA says plainly that you can’t claim the expenses of renting part of your property if you have no reasonable expectation of making a profit.
How much tax will your rent cost?
That turns on what else you earn, because rent stacks on top of your pay. Here’s what $16,000 of net rent adds in Ontario for three different salaries.
| Other income | Extra tax on $16,000 net rent | Share of the rent |
|---|---|---|
| $40,000 | $3,269.50 | 20.4% |
| $80,000 | $4,744.00 | 29.7% |
| $150,000 | $7,177.55 | 44.9% |
Those come from our rental income tax calculator, which uses 2026 federal and Ontario data. It leaves out CCA and gives no credit for a rental loss, so treat it as a rough guide, not a return.
Expenses matter more than most owners think. Take Lena in Kitchener, who rents a basement suite for $2,500 a month, so $30,000 a year. If she claims nothing against it and earns an $80,000 salary, the tax on that rent is $9,138.52. Claim $14,000 of real expenses and it drops to $4,744, which is a gap of about $4,394. Each $1,000 of expenses she can legitimately claim is worth roughly $300 in tax at that income. Not a bad reason to keep your receipts.
What should you watch for with co-owners and short stays?
If you own with a spouse or a friend, the T776 page has a warning that surprises people. Co-owners who don’t receive a T5013 slip report the gross income for the entire property on line 12599, and the CRA says not to split the gross income according to your ownership share. Your own share then comes in when the form is worked out, so read the instructions before you file.
Short-term rentals are a newer wrinkle. The CRA says expenses for a short-term rental are generally deductible, but you can’t deduct the non-compliant amount of expenses for a short-term rental that doesn’t meet local rules. If you list a place on a booking site, check what your city requires before the season starts.
Keep your receipts. The form is easy, but it only works when you can show every dollar.
What happens when you sell?
Selling a rental is a separate tax event. The gain is a capital gain, and CCA you claimed earlier can be added back. The capital gains tax calculator shows the gain side. We assume a 50% inclusion rate for 2026, though the CRA hasn’t put that figure on a page we could cite, and the increase to two-thirds was cancelled in the release of 21 March 2025.
To see the whole picture, open the rental property calculator for cash flow, or the income tax calculator for your full return. The marginal tax rate calculator shows what the next dollar of rent costs. Ontario’s rate climbs in narrow bands near $72,000 and $200,000 because the Ontario Health Premium rises there, so those results can look odd.
Does a rental loss reduce your other income?
It can, when the loss is real and you have a reasonable expectation of profit. A bad year with a new furnace and a vacant month might leave you with a loss, and that goes on line 12600 in brackets. But CCA can’t be used to create or increase that loss, and the calculator here gives no credit for a loss at all, so work it out on the form.
The sources behind this page
The form numbers, line numbers and expense rules come from CRA pages on rental income and form T776, read in October 2026. The tax examples use the 2026 data in our calculators. We aren’t a government service and we don’t speak for one.
Frequently asked questions
Which form do I use for rental income?
Form T776, Statement of Real Estate Rentals. The net result goes on line 12600 of your return.
What is the difference between gross and net rent?
Gross rent goes on line 12599. Net rent, after expenses, goes on line 12600 and is what you pay tax on.
Can capital cost allowance create a loss?
No. The CRA says a CCA claim can't create or increase a rental loss.
How do I split costs if I rent part of my home?
Claim all costs that belong only to the rented rooms and a share of shared costs. The CRA's example uses 40% when 4 of 10 rooms are rented.
Is rent taxed when I sell the property?
Selling is a separate event. The gain is a capital gain, and earlier CCA claims can be added back.
- Property and tax in Canada: buying, owning and selling
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