Rental property income in Canada is taxed as regular income at your marginal tax rate, meaning the percentage depends on your total income and province. If you earn $50,000 in rental income, you'll owe tax on that full amount based on your tax bracket, not a flat rental property tax rate. The key to reducing your tax bill is claiming all eligible expenses (mortgage interest, property tax, utilities, repairs, insurance, and property management fees), which are deducted from your gross rental income. Your actual tax owing depends on your province and how much other income you earn, so using a Canadian Income Tax Calculator or Rental Income Tax Calculator can help you estimate what you'll owe for 2026. When you own a rental property in Canada, the CRA treats the income it generates as part of your total taxable income. This is different from some countries that have a separate rental property tax rate. Instead, you pay tax on rental income at your marginal tax rate, which varies by province and increases as your total income goes up.
There is no separate 'rental property tax rate.' Rental income is taxed at your marginal tax rate based on your province and total income. If you earn $60,000 in rental income plus $40,000 from employment in Ontario, you'd pay tax on all $100,000 combined at your combined marginal rate (roughly 38% federally plus provincially).
You can deduct the interest portion of your mortgage, but not the principal. If your $400,000 mortgage payment is $2,000 monthly and $1,500 is interest, you deduct $1,500. The $500 principal is not deductible because it builds equity in your property.
A rental loss reduces your taxable income from other sources like employment. If you have a $10,000 rental loss and $80,000 employment income, you'd only report $70,000 taxable income. Unused losses can be carried back three years or forward indefinitely.
No, claiming CCA is optional. However, once you claim it, you must continue to claim it each year and recapture it when you sell the property. Many landlords skip CCA to avoid capital gains recapture tax at sale.
When you sell a rental property, 50% of the capital gain (the profit) is taxable income at your marginal rate. If you sold a property that gained $200,000, you'd report $100,000 as taxable capital gain. If you claimed CCA, you also owe tax on the CCA recaptured.