You can deduct most expenses directly related to earning rental income from your taxable rental income in Canada. Common deductible expenses include mortgage interest (not principal), property taxes, utilities, insurance, repairs and maintenance, condo fees, advertising for tenants, and property management fees. The key rule is that the expense must be reasonable, necessary to earn rental income, and properly documented. Capital improvements that add value to the property (like a new roof or kitchen renovation) are handled differently and cannot be fully deducted in one year. These are expenses tied directly to the property itself: - Mortgage interest (the interest portion only, not principal payments) - Property tax payments - Home insurance - Condo or strata fees - Utilities (if you pay them rather than the tenant) - Heating and hot water costs Keep receipts for all work done on the property: - Painting interior walls or trim - Fixing leaky faucets or plumbing issues - Replacing broken windows or doors - Carpet or flooring repairs (not full replacements) - Cleaning the property between tenants - Yard maintenance and snow removal The CRA distinguishes between repairs (which are deductible) and capital improvements (which are not).
No, only the interest portion of your mortgage is deductible. Principal payments reduce the outstanding loan balance but are not a rental expense for tax purposes. Your mortgage statement breaks down interest and principal, so you'll deduct only the interest.
A repair fixes existing damage or maintains the property in its current condition and is fully deductible. A capital improvement adds value or extends the property's lifespan (like a new roof) and cannot be deducted as a single expense. Instead, it increases your adjusted cost base.
Yes, the CRA requires documentation to support all deductions. Keep original receipts, invoices, and statements for at least six years. While you don't submit them with your return, you must provide them if the CRA audits your rental income.
Yes, advertising expenses (online listings, classified ads, or property signs) used to attract tenants are fully deductible. Keep all receipts and invoices from platforms like Kijiji, Craigslist, or local rental websites.
You have a rental loss, which can generally be deducted against other sources of income (employment, investment, or self-employment income) on your tax return. This reduces your overall taxable income for the year.