If your family owns a rental property in Canada—whether it’s a condo, a single-family home, or a basement suite—you generally report the rental activity on Form T776 (Statement of Real Estate Rentals). CRA accepts other statements, but they encourage T776 because it’s structured for exactly what they review: gross rents, deductible expenses, personal-use allocations, and (optionally) CCA.
To make filing easier (and reduce CRA questions), we created a Rental Income & Expenses Worksheet (T776) for TaxPro Canada clients. It’s designed around CRA categories and CPA working-paper best practices: clean totals, clear support, and correct allocations.
1) What counts as rental income (and where it goes)
Gross rental income is your total “gross rents” on T776, and it flows to your personal tax return (T1).
Include (typical examples):
- Monthly rent
- Parking/storage fees charged to tenants
- Amounts you keep that are truly rental income (e.g., certain non-refundable amounts—fact dependent)
Tip: Track rent by month and reconcile to bank deposits. If you use e-transfers, export the list and match it to your rent ledger.
2) Expenses: “Current” vs “Capital” (the #1 CRA issue)
CRA splits deductible costs into:
- Current expenses (day-to-day costs to earn rent)
- Capital expenses (improvements or purchases that provide a lasting benefit)
You can deduct reasonable current expenses to earn rental income, but capital expenses are handled differently (often through CCA).
Simple rule of thumb (practical)
- Repair / maintain = current expense (usually deductible now)
- Upgrade / improve / extend life = capital (usually not deductible in full now)
Example:
- Fixing a leaking tap → current
- Replacing all plumbing during a renovation → often capital
3) The core expense categories CRA expects (and how to support them)
Here are the categories that matter most on T776:
✅ Interest & bank charges (Line 8710)
Interest is deductible when the borrowed money is used to buy or improve the rental property (and you should keep statements + loan purpose documentation).
Tip: If you refinance and pull cash out for personal use, the interest becomes mixed—keep it clean.
✅ Repairs & maintenance
Keep invoices showing what was done and where. CRA loves clear descriptions.
✅ Insurance, property taxes, utilities
Easy wins—just keep the annual statements and proof of payment.
✅ Travel (to collect rent / manage repairs)
CRA allows travel to collect rent or supervise repairs, but board and lodging are considered personal in this context.
Tip: Track kilometers and purpose (like a mini-logbook).
✅ Personal portion allocation (if you rent part of your home)
If you rent part of a building you live in (basement suite, room rental), CRA requires you to split expenses between personal and rental portions (by square metres or number of rooms, etc.).
4) Capital Cost Allowance (CCA): useful, but handle carefully
CCA is tax depreciation on depreciable rental assets (building, appliances, furniture, etc.). You can’t deduct the purchase cost in full when you buy the asset; CCA is claimed over time.
Two key CRA rules families often miss:
- You can’t use CCA to create or increase a rental loss.
- Claiming CCA can cause recapture later when you sell (often increases taxable income in the year of sale). (This is standard CCA treatment—ask us before claiming if you’re likely to sell soon.)
Practical tip: Many families skip CCA on the building unless there’s a specific reason (income smoothing, high tax bracket year, long hold period, etc.).
5) Renting to family / below fair market value (FMV): avoid a common trap
If you rent to someone you know for less than FMV and you lose money, CRA may deny the rental loss. CRA explains that renting below FMV can limit your ability to claim a rental loss.
Tip: If you want to help family, consider documenting FMV rent (comparables) and your reasoning. The tax treatment depends heavily on facts.
6) CRA-ready recordkeeping (CPA best practice)
CRA’s general rule: keep records and supporting documents for 6 years from the end of the last tax year they relate to.
What to keep (minimum):
- Lease(s) + rent ledger
- Year-end summary of rent received (by month)
- Mortgage interest statement + loan agreements/refi documents
- Property tax and insurance statements
- Receipts/invoices for repairs (with work descriptions)
- Utilities (if landlord-paid)
- Mileage log (if you claim travel)
- Capital purchases list (appliances, roof, windows, renovations)
Real-life examples for a family
Example 1: Family rents out their second home while living in another city
Situation: The family owns a home in Winnipeg and lives in Toronto. They rent out the Winnipeg home.
- Report: All rent on T776 (gross rents).
- Deduct: mortgage interest (if the loan is tied to buying/improving the rental), property tax, insurance, repairs, utilities (if paid by landlord).
Tip: Keep a separate folder by property and a simple “repairs log” (date, vendor, purpose).
Example 2: Basement suite in the family’s principal residence
Situation: Basement is rented out; family lives upstairs.
- Allocate shared costs by area/rooms (e.g., 35% basement), and only claim the rental portion.
Tip: Keep a sketch/floor plan or measurements. CRA loves simple, consistent allocation methods.
Example 3: Big renovation year (repair vs improvement)
Situation: The family replaces an old furnace and also renovates a kitchen.
- Furnace replacement may be repair/maintenance or capital depending on facts; kitchen renovation is commonly treated as capital (improvement).
Tip: Separate invoices (repairs vs improvements). Capital items belong in the CCA/asset section, not “repairs.”
Quick “before you file” checklist (what we ask for)
- Property address + % ownership (if joint)
- Lease + rent received summary (monthly)
- Mortgage interest statement + refi details (if any)
- Property tax, insurance, utilities
- Repairs/maintenance receipts + short notes
- Travel km + purpose (if claimed)
- Capital purchases/renovations list (date, amount, what it was)
- If renting part of your home: your allocation method (sq ft/rooms)
Want us to prep your rental filing?
Use our TaxPro Canada Rental Worksheet (T776) to upload everything in a CRA-friendly format (one place, clean totals, clear allocations). If you share your numbers and documents, we’ll:
- categorize expenses correctly (current vs capital),
- ensure interest/allocations are defensible,
- and prepare your T776 cleanly for filing.