Rent from a basement suite, a condo or a whole house goes on your personal return, with a statement of what it cost you to earn it.
Where it goes on your return
You report rental income from real estate on Form T776, Statement of Real Estate Rentals, which you file with your personal return. The net income or loss from that form goes on line 12600 of your return.
If you rent out space and provide only basic services like heat, light, parking and laundry, it's usually income from property. Once you add services such as cleaning, security or meals, you may be running a business instead, which is reported differently (see self-employed tax returns).
Co-owners report their own share
If you own the property with someone else, each of you reports your share of the income or loss based on your share of ownership. That percentage should stay the same every year unless your ownership actually changes. Only an owner can claim the mortgage interest, even if someone else guaranteed the loan.
Current expenses and capital expenses
Current expenses come back regularly and give a short-term benefit, like repairs that keep the place in the condition it was in when you bought it. You deduct those in the year you have them.
Capital expenses give a benefit that lasts for years. The CRA's own example is a wooden house. Painting the outside is a current expense, but putting vinyl siding on it is capital. Renovations that extend the property's useful life or improve it beyond its original condition are usually capital. The same question comes up with appliances bought for a rented suite.
Capital cost allowance and selling
You can't deduct the cost of a building, furniture or equipment all at once. You claim capital cost allowance (CCA) on it over several years instead. CCA is optional, so you can claim anything from zero up to the year's maximum. You can't use it to create or increase a rental loss.
On September 15, 2026, Finance Canada proposed letting most depreciable property acquired on or after that date be written off in full in the year it becomes available for use. Buildings in CCA classes 1 and 3 are excluded, and individuals would still be limited in using it to create or increase a loss. This is a proposal, not law, so ask before you count on it.
When you sell, two things can happen:
- Recapture. If what you get for depreciable property is more than the undepreciated balance of its class at the start of the year plus any additions, the difference is a recapture of CCA. It goes on line 9947 of Form T776.
- Capital gain. If you sell for more than the property cost, you may also have a capital gain, reported on Schedule 3. You can't have a capital loss on depreciable property like a building. Our post on capital gains explains how the gain is worked out.
If you owned the property for less than 365 consecutive days before selling, the flipped property rules may apply.
Renting part of your home
If you rent part of the building you live in, you split the expenses for the whole property between your part and the rented part, by square metres or by number of rooms. Rent out 4 rooms of a 10-room house and you can deduct 100% of costs that relate only to those rooms, plus 40% of whole-house costs like property taxes and insurance.
When you sell, if only part of the home qualifies as your principal residence, you split the selling price and the adjusted cost base between the part you lived in and the rented part, using a reasonable method like square metres or rooms. Only the gain on the rented part is reported. In some situations (the CRA's example is a home daycare) the whole property keeps its principal residence status, but all three of these have to be true:
- the income-producing use is secondary to living there
- there's no structural change to the property
- no CCA is claimed on it
Renting to family below market rent
If your son or daughter, or anyone else living with you, chips in a small amount for groceries or upkeep, the CRA calls that cost sharing. You don't report it as income and you can't claim rental expenses against it. If you rent to someone you know for less than you'd charge a stranger and lose money, you can't claim the rental loss. A loss on a rental to a relative can be claimed if you charge the same rate you'd charge other tenants and expect to make a profit. More on this in renting to family below market value.
Records
Keep invoices, receipts and contracts for your rental income and expenses. You don't send them with your return, but the CRA may disallow expenses you can't back up. Generally you keep records for six years from the end of the tax year they relate to.
How we help
Rental income goes on your personal return, and we prepare it as part of that return. A rental takes real extra work, so it's quoted on top of the base price, and we give you the number before any work starts. If the CRA writes to you about a rental, our CRA advocacy work covers answering those letters with your authorization.