Personal Portion Versus Rented Portion
If you rent part of the building where you live, you can claim the full amount of your expenses that relate to the rented part of the building. You have to divide the expenses that relate to the whole property between your personal part and the rented part. You can split the expenses using square meters or the number of rooms you are renting in the building, as long as the split is reasonable.
For example, if you rent 4 rooms of your 10-room house, you can deduct:
- 100% of the expenses that relate only to the rented rooms, such as repairs and maintenance of the rooms; plus
- 40% (4 out of 10 rooms) of the expenses that relate to the whole building, such as taxes and insurance.
Generally, you can deduct any reasonable expenses you incur to earn rental income. The two basic types of expenses are:
- Current expenses; and
- Capital expenses.
Current or operating expenses are recurring expenses that provide a short-term benefit. For example, a current expense is the cost of repairs you make to keep a rental property in the same condition as it was when you bought it. You can deduct current expenses from your gross rental income in the year you incur them.
Capital expenses provide a benefit that usually lasts for several years. For example, costs to purchase or improve your property are capital expenses. Generally, you cannot deduct the full amount of these expenses in the year you incur them. Instead, you can deduct their cost over a period of several years as capital cost allowance.
You can usually deduct amounts for advertising that your rental property is available for rent.
You can deduct the premiums for insurance coverage on your rental property for the current year. If your policy gives coverage for more than one year, you can deduct only the premiums that relate to the current year. Deduct the remaining premiums in the year to which they relate.
You can deduct interest on money you borrow to buy or improve your rental property. You can also deduct interest you paid to tenants on rental deposits.
Maintenance and repairs
If you pay for repairs to your property, you can deduct the cost of labour and materials.
Management and administration fees
You can deduct the amounts you pay for managing the property. You can also deduct amounts paid or payable to agents for collecting rents or finding new tenants.
Motor vehicle expenses
You can deduct motor vehicle expenses in the following circumstances:
- If you own one rental property:
You can deduct reasonable motor vehicle expenses if:
- you receive income from only one rental property that is in the general area
where you live;
- you personally do part, or all, of the necessary repairs and maintenance on the
- you incur the motor vehicle expenses to transport tools and materials to the
You can deduct the cost of office supplies. These include small items such as pens, pencils, paper clips, stationery, and stamps.
Legal, accounting, and other professional fees
You can deduct fees for legal services to prepare leases or collect overdue rents.
You can deduct property tax assessed by a province or territory, and by a municipality, that relate to your rental property for the period when it was available for rent.
Salaries, wages, and benefits
You can deduct amounts paid or payable to superintendents, maintenance personnel, and others you employ to take care of your rental property.
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 in question.
You can deduct the cost of landscaping the grounds around your rental property only in the year you paid the cost
Buying an older building
If you buy an older building that you have to repair or renovate to make it suitable to rent, the cost of the work is a capital expense. This is the case even though you would usually treat these costs as current expenses.
Expenses you cannot deduct
Land transfer taxes
You cannot deduct land transfer taxes you paid when you purchased your property. Add these amounts to the cost of the property.
You cannot deduct the repayments of principal on your mortgage or loan on your rental property.
You cannot deduct any penalties shown on your Notice of Assessment or Notice of Reassessment.
Value of your own labour
You cannot deduct the value of your own services or labour.