Taxable rental income in Canada is calculated by subtracting eligible expenses from your total rental revenue. Not all rent you collect is taxable income. The CRA allows you to deduct operating expenses, maintenance costs, property taxes, insurance, and utilities from your gross rental receipts to arrive at your net taxable rental income. Understanding this calculation is crucial because it directly affects how much tax you owe on your rental property. Gross rental income includes any money you receive from tenants for occupying your property. This covers: - Monthly rent payments - Lease cancellation fees - Damage deposits that you keep (not returned to tenants) - Parking fees charged to tenants - Pet fees or other tenant-related charges - Airbnb or short-term rental revenue - Furnished rental premiums Damage deposits that you later return to tenants are not income. Similarly, prepaid rent for future years should be reported in the year it's actually earned, not when you receive it. The CRA recognizes dozens of rental property expenses that reduce your taxable income.
No, mortgage principal is not deductible. Only the interest portion of your mortgage payment reduces taxable rental income. You can find the interest vs. principal breakdown in your mortgage statement or amortization schedule.
Renovations that add value or extend the property's life are capital improvements, not current expenses. However, you can claim capital cost allowance (CCA) on the improvement cost over multiple years, which reduces taxable income differently than an annual deduction.
You report a rental loss. This CRA rule may apply to you: rental losses can offset other income (like wages) in the same tax year, or be carried back three years or forward indefinitely to offset future rental profit.
Yes, the CRA requires you to keep supporting documents (receipts, invoices, bank statements) for all claimed expenses. Keep records for at least six years in case of audit.
Rental income from renting a room in your home is still taxable rental income. You can deduct eligible expenses proportional to the rented space, such as utilities and property taxes allocated to the rented room's square footage.