⚡ Key Takeaway
Canadian landlords report rental income on Schedule L (Statement of Real Estate Rentals) and can deduct a broad range of property expenses. Mortgage interest (not principal), CCA, repairs, insurance, and property taxes are the biggest deductions most landlords miss.
Rental Income and the CRA
All rental income from Canadian and foreign properties must be reported on your T1 personal tax return using Schedule L. The good news: the CRA allows landlords to deduct nearly every expense incurred to earn that rental income, dramatically reducing the net taxable amount.
Every Deductible Rental Expense
Mortgage Interest (Not Principal)
The interest portion of your mortgage payments is fully deductible. The principal repayment is not. Your annual mortgage statement from your lender shows the interest/principal split for each year. This is typically the largest deduction for leveraged landlords.
Property Taxes
Annual municipal property taxes paid on the rental property — 100% deductible in the tax year they were paid.
Insurance Premiums
Landlord insurance, rental property fire insurance, and liability coverage premiums are fully deductible. Standard homeowner's insurance for a mixed-use property should be prorated.
Repairs vs. Capital Improvements
This is the most commonly misunderstood area of rental tax. Repairs (fixing what's broken — replacing a broken window, patching drywall) are fully deductible in the year incurred. Capital improvements (adding a new kitchen, replacing all flooring) must be added to the property's Adjusted Cost Base or claimed as CCA over time.
Capital Cost Allowance (CCA)
The CRA allows an annual depreciation deduction on the rental building (Class 1, typically 4% declining balance) and appliances (Class 8, 20%). CCA reduces current tax — but also reduces your Adjusted Cost Base, which can increase capital gains tax when you sell. See our CCA strategy section below.
Property Management Fees
Fees paid to a property management company to handle tenant relationships, maintenance coordination, and rent collection are fully deductible.
Advertising Costs
Listing fees on Kijiji, Rentals.ca, or other platforms, photographer fees, and any real estate agent fees paid to find tenants.
Utilities Paid by Landlord
Water, hydro, gas, and internet when included in rent or paid by the landlord directly. Not deductible if passed on to tenants.
Travel to the Property
Reasonable travel costs to inspect, collect rent, or supervise maintenance at a property located away from your primary residence.
CCA Strategy: Claim or Not?
CCA is optional — you don't have to claim it, and you can choose how much to claim each year (up to the maximum). Here's the trade-off:
- Claim CCA: Reduces rental income tax now. Best when you're in a high bracket and plan to hold the property long-term or transfer it at death (no immediate capital gain).
- Don't claim CCA: Preserves your ACB, minimizing the capital gain on eventual sale. Best if you plan to sell in the near-to-medium term.
Note: CCA cannot be used to create or increase a rental loss — it can only reduce net rental income to zero.