Do you own a property or several properties in Canada? Or perhaps you are renting out a few rooms in your principal residence? Chances are you are expecting some rental income at every end of the month and in that case, CRA expects you to declare all of it on your tax return come tax time. Good thing that there are a few deductible expenses that are associated with your rental income and you can deduct those expenses to calculate your net rental income.
The deductible expenses should be accomplished in Form T776 Statement of Real Estate Rentals when filing your personal tax return.
The following is a list of expenses that are deductible:
- Advertising
- Insurance
- Interest and bank charges
- Office expenses
- Professional fees (includes legal and accounting fees)
- Management and administration fees
- Repairs and maintenance
- Salaries, wages, and benefits (including employer’s contributions)
- Property taxes
- Travel
- Utilities
- Motor vehicle expenses
- Other rental expenses
- Prepaid expenses – an expense you paid for ahead of time.
Advertising
Includes advertising in Canadian newspapers and on Canadian television and radio stations. You can also include any amount you paid as a finder’s fee.
Insurance
The premiums you pay on your rental property for the current year. If your policy gives coverage for more than one year, deduct only the premiums related to the current year then deduct the remaining premiums in the year(s) to which they relate.
Office Expenses
These include small items such as pens, pencils, paper clips, stationery, and stamps but it does not include capital expenditures to acquire capital property such as calculators, filing cabinets, chairs, and a desk. These are capital items.
Professional fees (Includes Legal and Accounting Fees)
You can deduct fees for legal services to prepare leases or collect overdue rents and also the expenses you had for bookkeeping services, audits of your records, and preparing financial statements. You may be able to deduct fees and expenses for advice and help to prepare your income tax and benefit return and any related information returns.
If you incur legal fees to buy your rental property, you cannot deduct them from your gross rental income. Instead, divide the fees between land and building, and add them to their respective cost.
Management and Administration Fees
You can deduct the amounts paid to a person or a company to manage your property and you can also deduct amounts paid or payable to agents for collecting rents or finding new tenants.
If you paid commissions to a real estate agent when selling your rental property, include them as outlays and expenses on Schedule 3, Capital Gains (or Losses), when you report the disposition of your property.
Repairs and Maintenance
You can deduct the cost of labor and materials for any minor repairs or maintenance done to property you use to earn income however you cannot deduct the value of your own labor.
You cannot deduct costs you incur for repairs that are capital in nature. However, you can claim capital cost allowance.
Salaries, wages, and benefits (including employer’s contributions)
You can deduct the following:
- amounts paid or payable to superintendents, maintenance personnel, and others you employ to take care of your rental property;
- Workers’ compensation amounts payable on employees’ remuneration and Provincial Parental Insurance Plan (PPIP) premiums
- any insurance premiums you pay for an employee for a sickness, an accident, a disability, or an income insurance plan.
Property Taxes
You can deduct property taxes you incurred for your rental property for the period it was available for rent. For example, you can deduct property taxes for the land and building where your rental property is situated.
Travel
You can deduct travel expenses you incur to collect rents, supervise repairs, and manage your properties.
Travelling expenses include the cost of getting to your rental property, but do not include board and lodging, which we consider to be personal expenses.
To claim the travel expenses you incur, you need to meet the same requirements discussed in Motor vehicle expenses.
Utilities
You can deduct expenses for utilities, such as gas, oil, electricity, water, and cable, if your rental arrangement specifies that you pay for the utilities of your rental space or units.
If you have further tax concerns about your rental property, feel free to contact IDM Professional Accountant CPA.
