Rental Income for the 2021 Canadian Tax Year

Rental Income: Deductible Expenses

Have you received government COVID-19 assistance for rental income or expenses such as the CEWS (Canada Emergency Wage Subsidy)? Make sure to include the amounts in your rental income or expenses.

We’ve also broken down the list of deductible expenses that you can claim against your rental income so keep reading to find out more.

Expenses You Can Deduct from Your Rental Income

• Prepaid Expenses
  • Expenses paid ahead of time such as insurance. You may use the accrual method or the cash method.
• Advertising Costs
  • For example, advertising your rental property on paid media networks or finder’s fees are all deductible.
• Insurance Expenses
  • Premiums paid on the rental property for the current year may be deducted from your income.
• Interest and Bank Charges
  • Interest charged on money borrowed to improve or buy rental properties may be claimed as well as interest charges paid to tenants on rental deposits.
• Office Expenses
  • This includes small items like pens, pencils, paper clips, stationary and stamps but does not include capital expenditures such as cabinets, office chairs or desks.
• Professional Fees
  • These fees include legal costs such as legal services to prepare leases or collection costs for overdue rent. For accounting fees, this would include bookkeeping services or even the cost of preparing your income tax return by an accountant.
• Management and Administration Fees
  • If you pay for a person or company to manage the rental property or to agents to collect rents or even to find tenants, you may claim these under this category.
• Repairs and Maintenance Costs
  • Costs of labour and materials for minor repairs or maintenance are deductable excluding your own labour and capital costs.
• Salaries, Wages & Benefits
  • Amounts paid to superintendents, maintenance personnel and others employed to take care of the rental property can be deducted but not the value of your own services.
• Property Taxes
  • This is only deductible for the period that the property was available to rent. For example if the property was only available to be rented for half the year, that proportion of the property taxes is deductible.
• Travel Expenses
  • Travel expenses incurred to collect rent, supervise repairs and managing properties are all deductible.
• Utility Costs
  • You can deduct the expenses for utilities if the rental arrangement specifies that you will be paying for the utilities of the rental space.
• Motor Vehicle Expenses
  • If you own one rental property, you can only deduct reasonable motor vehicle expenses if you:
    • Receive income from only one rental property that is in the general are in which you live.
    • You personally do all or part of the necessary repairs and maintenance on the property.
    • You have motor vehicle expenses to transport tools and materials to the property.
    • You can’t deduct motor vehicle expenses incurred to collect rent as they are personal expenses.
  • If you own two or more rental properties, here’s your criteria to deduct motor vehicle expenses.
    • If you use your motor vehicle and incur reasonable expenses to collect rent, supervise repairs or manage the properties, you may deduct your expenses.
    • Your rental properties have to be located in at least two different sites and away from your principal residence.

Other Expenses

Rental Income: Non-Deductible Expenses

• Landscaping Costs
  • Landscaping the grounds around the rental property is only applicable in the year you paid the cost regardless of whether you use the accrual of cash method of calculation.
• Lease Cancellation Payments
  • Amounts paid or payable to tenants to cancel their leases are deductible.
• Condominium Fees
  • Not only can you deduct the normal fees for a rental unit but also condominium fees that come from your share of the upkeep, repairs, maintenance and other current expenses.
• Vacant Land
  • Rental income from vacant land can have the operating expenses deducted as well as interest and property taxes.
  • The limit for the deductions of the interest and property tax is the amount of rental income left after deducting all other expenses but you can’t create or increase a rental loss via interest or taxes.
  • You also can’t deduct mortgage interest, property taxes, income taxes, profit taxes or land transfer taxes if there is no earned income from the land.

Find out more via the Canadian Government’s section on the taxation of rental income by clicking here or at the link below.