Resources · Rental income

Rental income, deducted line by line.

Rent you collect is taxable — but only on what’s left after your legitimate expenses. The trouble is knowing which expenses count, and on which line they belong. Here’s a plain-language tour of every expense line on Form T776, the CRA’s Statement of Real Estate Rentals, with real examples for each — plus the two rules that trip up most landlords.

Where to start: open the line-by-line explorer below and click any expense line to see what it covers and a few worked examples. Then read the two rules that matter most: current vs. capital and renting part of your home.

The basics

You’re taxed on net rent, not gross

Report your rental on Form T776. Add up the rent you earned, subtract your deductible expenses, and the net figure is what gets taxed — at your full marginal rate, the same as salary. That net income flows to line 12600 of your personal (T1) return.

Line 8299Gross rents

Lines 8521–9270Deductible expenses

Line 9946 → T1 line 12600Net rental income

Rent received in cash or by cheque goes on line 8141; rent paid “in kind” (say, a tenant doing repairs in exchange for rent) is reported at its fair market value on line 8230. Together they make up your gross rents on line 8299. Everything below is about what you get to subtract.

Interactive

The T776 expense lines, one at a time

Every deductible expense on the form has its own line number. Click a line to see what CRA lets you put there, and up to three everyday examples.

👈 Pick an expense line. Amounts in examples are illustrative.

Rule #1 · the big one

Current vs. capital: deduct now, or over time?

This is the single most common rental-filing error. A current expense comes right off this year’s income. A capital expense is added to the cost of the property and written down slowly through CCA (if at all). Same receipt, very different tax result. CRA weighs a few tests:

The test CRA applies	Current expense (deduct now)	Capital expense (write down over time)
Lasting benefit? Does it give an enduring advantage?	Painting the exterior of a wooden house	Putting vinyl siding on those same walls
Maintain or improve? Restore to original, or make better?	Repairing the existing wooden steps	Replacing wooden steps with concrete
Part, or a separate asset? Fixing part of the building, or buying a thing?	Re-wiring part of the building	Buying a new refrigerator for the unit
Value vs. the property? A tie-breaker when the above are unclear.	A modest, ordinary maintenance cost	A large outlay that betters the property

Fix / restore → current Upgrade / replace whole → capital Repairs to make a just-bought place rentable → capital

One trap worth naming: fixing up a property you just bought to get it into rentable shape is treated as capital, even though the identical repair on a place you’ve owned for years would be a current expense. When it’s a close call — and it often is — let’s look at the receipt together.

Rule #2 · renting part of your home

Renting a room or a suite? Split the expenses.

If you rent out part of the home you also live in, you can only deduct the rental portion of shared costs like property tax, insurance, heat and mortgage interest. A reasonable split usually blends area and time.

A worked split

Say you rent 4 rooms of a 10-room house. Expenses that relate only to the rented rooms are 100% deductible. Whole-building costs — property tax, insurance, the mortgage interest — are deductible at 4 ÷ 10 = 40%. For spaces you share with the tenant (kitchen, living room), estimate a reasonable percentage based on use.

Rooms rented

4 / 10 = 40%

The share of whole-building expenses (taxes, insurance, interest, utilities) you can claim.

On the form

Line 9949

You enter the full expense, then report the personal-use portion on line 9949 so only the rental share is deducted.

Two cautions. You can’t deduct expenses for renting part of your home if there’s no reasonable expectation of profit. And claiming CCA on the part of your home you rent can put your principal-residence exemption partly at risk when you sell — a big reason most people leave CCA alone here.

A quick word on

Capital cost allowance (CCA)

When you buy something with lasting value — the building itself (never the land), appliances, furniture — you don’t deduct it all at once. Instead you may claim CCA, writing the cost down a little each year. It’s optional, and it comes with strings:

CCA can’t create or increase a rental loss. You can only use it to bring net rental income down toward zero, not below.
It comes back on sale. If the building has risen in value, the CCA you claimed is “recaptured” and added to income in the year you sell — often at a higher rate than the deductions saved you.
Land isn’t depreciable, so the purchase price has to be split between land and building first.

CCA is a genuine deferral tool in the right situation and a costly mistake in the wrong one. Because the recapture and principal-residence interactions are easy to get wrong, this is a decision worth making with your CPA before you file, not after.

Before you file

Three classic rental mistakes

Deducting the mortgage principal

Only the interest portion of a mortgage payment is deductible (line 8710). The principal is you buying the asset — never an expense. Split every payment.

Charging for your own labour

Paint the unit yourself and you can deduct the paint, but not the value of your time. CRA doesn’t allow a deduction for your own labour or services.

Expensing a renovation

A new kitchen or an addition is capital, not a repair. Writing it off all at once is the error CRA most often reassesses on rentals. See Rule #1.

From receipts to a return

Want your rental done right — and optimized?

Rental income is one of those areas where a clean set of books and a couple of good judgment calls (current vs. capital, whether to touch CCA) genuinely change your tax bill. That’s exactly the kind of thing we sort out with clients — no jargon, just a clear plan.

Book a 30-min chat Send us an email

A conversation starter, not advice. This is a plain-language summary of Form T776 based on current CRA guidance, written for general education. Line numbers, eligibility and the current-vs-capital call all depend on your specific facts, and the rules change. Use it to frame your questions, then let’s look at your actual numbers before you file. See the CRA’s Rental Income guide (T4036) for the source rules.

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