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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. Gross rents go on line 12599 of your return and the net figure goes on line 12600. A loss goes in brackets.
The CRA also asks you to decide whether you have rental income or a business. Most people with a flat or a basement suite report rent. If you run something bigger, the CRA’s pages on rental versus business deserve a read 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. We didn’t check the CRA’s rule on mortgage interest for this page, so look at the T776 guide for it. The CRA 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 shared ones.
And if you have no reasonable expectation of profit, the CRA says you can’t claim the expenses of renting part of your property at all.
How much tax will your rent cost?
That turns on what else you earn, because rent stacks on top. Here is 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. Run the same $80,000 salary with $30,000 of net rent, meaning no expenses claimed, and the tax is $9,138.52. Each $1,000 of receipts you keep is worth roughly $300 in tax at that income.
What should you watch for with co-owners and short stays?
If you own with a spouse or a friend, expenses and CCA follow your share. The T776 instructions have a section for co-owners, so read it before you file, because the way gross rent is shown isn’t obvious.
Short-term rentals are a newer wrinkle. The CRA says deductions can be limited if a short-term rental doesn’t meet local registration rules, and you track compliant and non-compliant days apart. We didn’t confirm the details by province, so check that page if you list a place on a booking site.
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.
Where the numbers come from
The form numbers, line numbers and expense rules come from CRA pages on rental income and form T776, read in September 2026. The tax examples use the 2026 data in our calculators. This site has no link with the CRA.
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
How property tax and transfer tax apply when you buy, own, rent out or sell a home in Canada, with the calculators for each step
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.