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Rental property tax deductions cover any reasonable expense you pay to earn the rent, and the big ones are mortgage interest, property tax, insurance, repairs and management fees. Each dollar you can claim cuts your taxable rent. In Ontario on $60,000 of other income, $6,000 of extra expenses lowers the tax bill by about $1,929.
Which rental expenses can you deduct?
The CRA’s rule is broad, and it fits in one line.
You can deduct any reasonable expenses you incur to earn rental income.
CRA guide T4036, Rental Income, canada.ca
The guide names the usual categories, and the table below sums them up.
| Expense | What the CRA says |
|---|---|
| Mortgage interest and bank charges | Deductible when the money was borrowed to buy or improve the property |
| Property tax | Deductible |
| Insurance | Premiums for the current year |
| Repairs and maintenance | Deductible when they keep the property in its original condition |
| Management and administration fees | Paid to a manager or rent collector |
| Legal and accounting fees | For lease preparation or collecting rent |
| Advertising | Including finding tenants |
| Utilities | When the lease makes you pay them |
| Salaries and wages | For people who look after the property |
Motor vehicle costs can count too, but only in specific situations, so read the guide before you claim a mileage log.
What is the difference between a repair and an improvement?
This is where landlords lose the most time. A repair keeps the place as it was. An improvement makes it better than it was.
The CRA’s own example makes it plain. Painting the outside of a wooden house is a current expense, so you deduct it in the year you pay. Putting vinyl siding on the same walls is a capital expense. You don’t deduct that in one go. You spread it over the years through capital cost allowance, or CCA.
If a job is half and half, say a new floor where the old one had worn out, expect an argument with yourself about where to draw the line. Keep the invoice, and write down what was replaced and why. A landlord named Dev in Winnipeg who swaps a broken furnace for the same kind of unit has a very different case from one who adds central air for the first time.
How does capital cost allowance work on a rental?
You can’t deduct the price of the building in the year you buy it. CCA lets you deduct part of its cost over the years, since buildings, furniture and equipment wear out. The land doesn’t count, so the capital cost is the purchase price without the land, plus the part of legal and other fees that belong to the building. A typical rental building sits in Class 1 at 4% a year.
Two rules matter most. First, you choose the amount each year, anywhere from zero to the maximum. Second, you can’t use CCA to create or increase a rental loss. If your expenses already beat your rent, adding CCA doesn’t help.
Claiming CCA isn’t free money, though. When you sell, some of what you claimed can come back as recapture and get added to your income. That’s a reason to think before you claim the maximum every single year, and to read the CRA’s page on it before you decide. The capital gains tax calculator covers the gain side.
What can’t you deduct?
Mortgage principal isn’t an expense. Only the interest is. Land transfer tax you paid on the purchase isn’t deductible either, because it’s added to the cost of the property. The same goes for penalties on assessments, the value of your own labour, and personal costs.
If you rent out only part of your home, split the expenses. The CRA’s example is renting four rooms of a ten-room house: you claim all of the expenses that relate only to those rooms, plus 40% of the ones that relate to the whole building. And if there’s no reasonable expectation of profit, you can’t claim the expenses at all.
Short-term rentals have their own limits. If yours isn’t registered where a province or municipality requires it, the CRA limits the expenses and CCA you can claim, and the T776 form has charts for it.
What do deductions save on a real return?
Take rent of $24,000 in Ontario, with $60,000 of other income. With $9,000 of expenses, net rental income is $15,000, and the extra tax is $4,597.50. That leaves you $10,402.50.
Raise the expenses to $15,000 and net income drops to $9,000. The tax is then $2,668.50. The extra $6,000 of deductions saved $1,929.00, which is about 32 cents on every dollar. Your own rate depends on your other income and your province, so run your numbers through the rental income tax calculator.
That calculator takes CCA as a 4% claim on a building cost you enter, capped so it can’t create a loss, and it shows the tax a rental loss saves. To see whether a property makes money before tax at all, use the rental property calculator. Mortgage interest is the largest line for most owners, and the mortgage calculator shows how much of each payment is interest.
What if your expenses are higher than your rent?
Then you have a rental loss for the year, and it generally lowers your other income, so it isn’t wasted. A new landlord with a hefty mortgage and a few repair bills in year one often ends up here. The catch is the CCA rule above: depreciation can’t be the thing that pushes you into a loss. If the loss comes from real costs, like interest and a leaky roof, you report it on the T776 with your regular return.
What records should you keep?
Keep invoices, receipts and contracts for six years from the end of the tax year they relate to. Rental income is reported for the calendar year, January 1 to December 31, on your annual return. A spreadsheet with one line per receipt, kept as you go, beats a shoebox at tax time.
Sources, and how we checked them
The rules come from the Canada Revenue Agency‘s rental income guide T4036, its T776 form pages and its CCA page for rental property, read in September 2026. The tax figures come from the site’s own tax engine. No government body has reviewed or endorsed what you read here.
Frequently asked questions
Can I deduct my mortgage payments on a rental?
Only the interest. The principal part of a mortgage payment is not an expense.
Is painting a rental a repair or an improvement?
The CRA treats painting the outside of a wooden house as a current expense. Adding vinyl siding is a capital expense.
Do I have to claim capital cost allowance?
No. You can claim any amount from zero up to the maximum each year, and CCA can't create or increase a rental loss.
Can I deduct land transfer tax?
No. The CRA says land transfer tax is added to the cost of the property, not deducted as an expense.
How long should I keep rental records?
The CRA says to keep records for six years from the end of the tax year they relate to.
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