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Real estate accounting comes down to three habits: keep the property’s money apart from your own, sort every cost into current or capital, and keep the paper for six years. Get those right and the tax return is mostly arithmetic. Get them wrong and you’ll pay tax on money you never kept.
This page is for people who own rentals or run a small real estate business in Canada. It isn’t about brokers or property managers working for clients, and it leaves out GST and HST on property sales, which are a separate topic.
What does real estate accounting need to track?
The CRA asks you to report gross rents, rental expenses and capital cost allowance (CCA) on Form T776, and says other statements are accepted too. So the books need to give you three totals at year end, and nothing fancier.
Do you need a separate bank account for each property? The CRA doesn’t say you must, but it’s the cheapest accounting system there is. Every rent deposit and every bill goes through it, so the statement itself becomes your ledger. If you own one duplex, a single account just for the rental is plenty. With three or four doors, one account per property saves you from untangling who paid for what.
The CRA says to keep records for six years from the end of the tax year they relate to, and that it may refuse expenses you can’t support with receipts. Don’t mail them in with the return. Hold them.
Current or capital costs, where the money gets decided
| Type | CRA description | Tax treatment |
|---|---|---|
| Current expense | Recurring, short-term benefit, such as repairs that keep the place as it was | Deduct in the year you pay it |
| Capital expense | Lasts several years, such as buying or improving the property | Generally deducted over time as CCA |
A repainted suite is current. A new addition is capital. The CRA’s page on current and capital rental expenses gives plain examples: painting the exterior is current, putting vinyl siding on is capital, and buying a refrigerator for a unit is capital because it’s a separate asset. The grey area in between, like replacing a whole roof, is where people guess, and the CRA’s rental income guide is the place to settle it.
Does it really matter? It does, in dollars. Take an Ontario landlord with $80,000 of other income, $30,000 of rent and $14,000 of expenses. The rental income tax calculator puts the extra tax at about $4,744. If $4,000 of those costs had to be treated as capital instead, the net income rises to $20,000 and the extra tax to about $5,959, or roughly $1,215 more this year. You’d get some of it back through CCA later, but slowly.
Why mortgage payments are not all an expense
This catches new landlords every time. Consider a $600,000 property with $150,000 down, a 4.5% mortgage and 25 years to pay. The rental property calculator puts the loan payments at about $29,888 a year.
In the first year roughly $10,028 of that pays down the principal. The other $19,860 or so is interest. Only the interest goes in the expense column. The principal is your own equity growing, and it’s no tax deduction.
That’s why a property can look profitable on paper and still drain your bank account. With $3,000 monthly rent and ordinary costs, the same example has a net operating income of $25,800 and a cash flow of about minus $4,088. The cap rate calculator shows the 4.3% yield on price that gets there. Your accounts need to show both the tax picture and the cash picture, since they tell different stories.
What should you record each month?
Fifteen minutes is enough if you do it on schedule. Log the rent received, by unit and by date. Add each bill with its receipt, marked current or capital. Note the mortgage payment split into interest and principal, which your lender’s statement shows. Then compare the bank balance with your list.
That last step finds the mistakes while they’re a few bucks, not a few thousand. A tenant who paid half a month and promised the rest is one example. A contractor who billed twice is another.
Should the property sit in a company?
Sometimes, but not as a default. A corporation adds its own return, its own bookkeeping and its own bills, and there’s a real chance that the savings will be smaller than the extra work. This page doesn’t quote a current rate on rental income inside a corporation. The corporate tax calculator gives a starting estimate for ordinary business income, which isn’t the same thing.
Flips are another matter. Whether a sale counts as business income or a capital gain changes the tax, and that line depends on the facts of each purchase. If you’re buying to resell, ask an accountant before the first purchase. The house flipping calculator tests the deal itself.
Mistakes that cost landlords money
Mixing personal and property spending tops the list. One grocery run on the rental account and you’ve created an hour of cleanup.
The next is skipping the capital side. You can claim CCA on a rental building, but it has consequences when you sell, so think about it with your accountant rather than ticking it by reflex.
And there’s bad timing: collecting your receipts in April. Do it monthly. Fifteen minutes a month beats a weekend at tax time.
Where this information comes from
The form, record-keeping and expense rules are from the Canada Revenue Agency‘s rental income guidance, read in September 2026. Dollar examples come from our own calculators using 2026 tax data and the rates stated above. This is an independent site with no link to the CRA.
Frequently asked questions
What form do I use to report rental income?
The CRA encourages Form T776, which covers gross rents, expenses and capital cost allowance. Other statements are accepted.
How long do I keep rental records?
Generally six years from the end of the tax year they relate to. The CRA may refuse expenses you can't support.
Is mortgage principal a rental expense?
No. Only the interest is an expense. The principal builds your equity.
What is the difference between a repair and an improvement?
A repair that keeps the property as it was is a current expense. A cost with a benefit lasting several years is capital and is deducted over time as CCA.
Do I need a separate bank account for my rental?
The CRA doesn't say you must, but it makes the records far simpler.
All property and estate tax calculators
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