The Canada Revenue Agency filing mechanics for rental income: Form T776 and Guide T4036, which expenses are deductible, how capital cost allowance works and its limits, short-term rental non-compliance amounts, and keeping records for six years.
Applies in: across Canada
This guide covers filing mechanics only: how to report rental income from property on a Canadian income tax return, using Form T776, Statement of Real Estate Rentals, and Guide T4036, Rental Income. It is not tax advice for your situation, it makes no claim about what you owe, and it does not decide whether your rental activity is the right structure for you. It states the Canada Revenue Agency (CRA) rules as the CRA states them in Guide T4036, revision 25,. Read the current guide and form for the tax year you are filing, because the guide itself notes that new items may include budget changes not yet law when published, and class rates and limits are set for specific years.
This guide is a different surface from the landlord-tenant procedure grid on this site. That grid covers the provincial and territorial bodies that hear landlord and tenant disputes, from the Residential Tenancy Branch in British Columbia to the Landlord and Tenant Board in Ontario and the Tribunal administratif du logement in Quebec, and what to prepare for a hearing. This guide covers none of that: no eviction procedure, no rent-increase rule, no tenancy dispute. If your question is about a tenant, a notice, or a hearing, read the grid. If your question is about reporting the rent on a tax return, read this guide.
Guide T4036 is for rental income from property. Rental income can be income from property or from a business, and the guide states the test is the number and types of services you provide for your tenants. In most cases you are earning income from property if you rent space and provide basic services only, such as heat, light, parking, and laundry facilities. If you provide additional services such as cleaning, security, and meals, you may be carrying on a business, and the more services you provide, the greater the chance the operation is a business. If the operation is a business, do not use Guide T4036: the CRA directs you to Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income. The distinction matters beyond the form: business income has different reporting, different expense treatment, and different loss rules, and filing rental income as business income, or the reverse, misstates both.
Rental losses are not allowed if the operation is a cost-sharing arrangement rather than an operation to make a profit, as Guide T4036 states in its calculation chapter. The guide also has a separate section on renting below fair market value, which addresses the reporting consequences where rent is below market, including cost-sharing arrangements with non-arm's-length persons. Read that section before reporting a loss on a below-market rental, and do not assume a loss on a family arrangement is deductible on the same basis as a loss on an arm's-length rental. Accommodation sharing has its own CRA guidance: Guide T4036 directs readers looking to report income or expenses from accommodation sharing to search accommodation sharing on the CRA site, and this guide does not state the accommodation-sharing rules.
All rental properties have a December 31 year-end. If it is the first year of operation, the fiscal period starts on the year, month, and day you began the rental operation; otherwise it starts January 1, and the end date is December 31 of the current tax year. Report the rental income you earned in the calendar year from January 1 to December 31, on Form T776, for each property: its address and the number of units rented, including all short-term rentals.
Gross rental income has two lines on the form. Line 8141, gross rents, takes the total rents you earned in the year where the tenant paid in cash or by cheque. Line 8230, other income, takes income received in other forms: if the tenant pays in kind, with goods or commodities instead of cash, or with services, report the fair market value at line 8230. Line 8299, total gross rental income, is the sum of the two. Do not net expenses against gross rents before line 8299, and do not omit rent paid in kind or services because no money changed hands: the CRA's instructions treat the fair market value of in-kind payment as income. If you are a co-owner or a member of a partnership, the share rules in Step 6 decide whose return carries which portion of these totals.
The CRA allows any reasonable expenses incurred to earn rental income. The two basic types are current expenses and capital expenses. Current expenses are recurring expenses providing a short-term benefit, such as repairs keeping the property in the same condition as when acquired, and are deductible in the year incurred. Capital expenses provide a benefit lasting several years, such as the purchase price or an improvement, and generally cannot be deducted in full in the year incurred: their cost is deducted over several years as capital cost allowance, covered in Step 4. The purchase price of rental property, including legal and accounting fees allocated between land and building, is a capital expense, not a current one.
The deductible current expenses on Form T776, with their line numbers as listed in Guide T4036, are: advertising, line 8521; insurance, line 8690; interest and bank charges, line 8710; office expenses, line 8810; professional fees including legal and accounting fees, line 8860; management and administration fees, line 8871; repairs and maintenance, line 8960; salaries, wages, and benefits including employer contributions, line 9060; property taxes, line 9180; travel, line 9200; utilities, line 9220; motor vehicle expenses not including capital cost allowance, line 9281; and other expenses, line 9270. Prepaid expenses have their own treatment in the guide: an expense paid in advance is generally deducted in the year or years to which it relates, not all in the year of payment. Legal fees to prepare leases or collect overdue rents are deductible; legal fees to buy the property are not deductible from gross rental income, and are instead divided between land and building and added to capital cost.
Enter the full amount of each expense in the total-expenses column, and the personal portion in the personal-portion column. Deductible expenses are total expenses minus the personal portion, and net income or loss before adjustments, line 9369, is gross rental income minus deductible expenses. The CRA's worked example shows the mechanics: a taxpayer enters the full amount of each expense, then enters 75% of property taxes, electricity, and insurance as the personal portion where that share of the property is personal use, and claims nothing for advertising in the personal column because advertising related wholly to the rental. Keep the basis for every personal-portion split: area, days, or another documented measure that matches how the property was actually used.
Capital cost allowance (CCA) is the deduction for the cost of depreciable property, such as a building, furniture, or equipment, spread over several years because the property wears out or becomes obsolete. You cannot deduct the initial cost in the year of acquisition; you deduct a percentage of the remaining balance, the undepreciated capital cost (UCC), each year under the declining-balance method for most classes. You group depreciable property into classes, each with its own rate, and calculate the claim in Area A of Form T776, entering the total claim on line 9936.
The classes most relevant to rental property, as listed in Guide T4036, are: Class 1 at 4%, which includes most buildings acquired after 1987 unless they belong to another class, including building components such as wiring, lighting, plumbing, sprinkler systems, heating and non-window air-conditioning equipment, elevators, and escalators; Class 3 at 5%, for most buildings acquired before 1988 subject to the guide's conditions; Class 6 at 10%, for buildings of frame, log, stucco on frame, galvanized iron, or corrugated metal meeting the guide's conditions, plus certain greenhouses and fences; Class 8 at 20%, for furniture, household appliances, tools costing $500 or more, fixtures, machinery, and other rental equipment; and Class 10 and Class 10.1 at 30%, for motor vehicles and passenger vehicles, with Class 10.1 applying to passenger vehicles over the prescribed cost limit, $38,000 before tax for vehicles bought in 2025, listed separately. Class 13 covers leasehold interests, with a maximum rate depending on the lease terms. Do not assign a building to a class by its age alone: the guide's class descriptions turn on acquisition date, construction, and use, and a building can sit in Class 1, 3, 6, 31, or 32 depending on those facts.
Four limits govern every CCA claim. First, land is not depreciable: claim CCA only on the building portion of the cost, and enter land additions separately. Second, CCA cannot create or increase a rental loss: calculate overall net rental income across all properties before claiming CCA, and cap the claim at that net income, as the FAQ explains. Third, the half-year rule usually limits the first-year claim to one-half of net additions to a class in the year of acquisition, and the available-for-use rules decide when CCA can start: generally only once the property has become available for use, which for a building is usually the earliest of purchase or completion, renting out 90% or more of the building, the second year after acquisition, or just before disposition. Fourth, CCA is optional in amount each year: you can claim any amount from zero to the maximum, and an unclaimed amount stays in the class balance. That optionality is a planning tool, not a loophole: claiming less preserves UCC for later years, and claiming CCA on a building designated as a principal residence, or under a change-in-use election, has the consequences in Step 5.
On disposition, CCA reverses in part. In the year you dispose of rental property, you may have to add an amount to income as recaptured CCA, entered on line 9947 for co-owners, or deduct an amount as a terminal loss, line 9948, depending on whether proceeds exceed or fall short of the remaining UCC. Guide T4036's proposed changes for 2025, including the accelerated and reaccelerated investment incentives and the enhanced first-year allowance for specified classes, and the proposed 10% accelerated rate for eligible new purpose-built residential rentals beginning construction after April 15, 2024 and before 2031 and available for use before 2036, are described in the guide as proposed changes not yet law at publication. Do not claim an accelerated rate on the strength of a proposal: confirm the law in force for the tax year before claiming it.
A building you designate as your principal residence interacts with CCA in ways that can cost more than the CCA saves. Guide T4036 states that a taxpayer can claim CCA on the rented area only if not designating the building as a principal residence, in the worked example in its completing-T776 instructions. Its principal-residence chapter covers designating a principal residence, disposition of a principal residence, and change in use, including the election available when you change your principal residence to a rental property: you can elect not to be considered as having started to use the property as a rental property, which means you do not report a capital gain on the change in use, but if you make that election you cannot claim CCA on the property. Any income from the property, minus applicable expenses, must still be reported.
The same caution applies to renting part of your home. Split the expenses and the CCA by the rented portion, keep the split documented, and read the principal-residence chapter before claiming CCA on a home you live in, because claiming CCA can affect the principal-residence exemption when you later sell. This guide states no principal-residence exemption figure or holding-period rule, because the chapter's rules turn on designation years and use history that must be worked from the guide for your facts. If the property was formerly your principal residence, or may become one again, work the change-in-use position before filing, not after.
Short-term rental income is reported on the same Form T776, with additional rules where the rental did not comply with provincial or municipal requirements. Guide T4036 states you can deduct expenses relating to a short-term rental unless they are a non-compliant amount, and you cannot deduct the non-compliant amount of expenses or the non-compliant amount of CCA. Form T776 provides Chart A, non-compliant amount of expenses, and Chart B, non-compliant amount of CCA, to calculate them, with the results entered on lines 9366 and 9367. Deductible expenses are total expenses minus personal expenses minus the non-compliant amount of expenses.
The definitions in Guide T4036 set the calculation: a non-compliant short-term rental is a short-term rental in a province or municipality meeting stated conditions, and the non-compliant amount is determined by a formula based on the number of days in the tax year the property was a non-compliant short-term rental. The guide's worked example shows the method: divide the short-term rental expense portion between rentals, multiply each rental's portion by non-compliant days divided by total short-term rental days, and enter the total on line 9366. This guide states no day threshold, no definition of short-term rental by nights, and no list of compliant jurisdictions, because those turn on provincial and municipal rules that must be checked for the property's location and the rental's dates. A rental that complied for part of the year and not for another part is apportioned by days: keep the compliance record, including registration, licence, and platform records, alongside the expense records, so the day count can be shown.
Most of the time, owning rental property with one or more persons makes you a co-owner, for example owning with a spouse or common-law partner. A partnership is a different relationship: two or more people carrying on a business, with or without a written agreement, to make a profit, and co-ownership of rental property as an investment does not by itself make a partnership. If you are a co-owner, fill in all parts of Form T776 that apply, including Part 2, details of other co-owners and partners, and calculate your share of net income before adjustments on line 9369, add other expenses you have as a co-owner not deducted elsewhere on line 9945, add your share of recaptured CCA on line 9947, deduct your share of terminal loss on line 9948, and deduct your CCA claim on line 9936 to reach net income or loss on line 9946. If you are a member of a partnership and received a T5013 slip, Statement of Partnership Income, fill in only the fields the guide lists: the partnership business number, your ownership percentage, and the amount from box 110, or box 107 for a limited partnership, on amount 7, adjusted for a partner GST/HST rebate or other partner expenses where they apply.
GST/HST touches rental reporting in three places Guide T4036 names, and none of them is a substitute for the GST/HST rules themselves. First, the GST/HST new residential rental property rebate under section 256.2 of the Excise Tax Act allows landlords who buy or build new residential housing, substantially renovate existing housing, build an addition to multiple-unit housing, or convert commercial property into housing to claim a rebate, where the housing is rented for long-term use as a primary place of residence, using Form GST524, with Form GST525 for multiple-unit housing, under Guide RC4231. Second, a partner in a GST/HST-registrant partnership may claim a GST/HST rebate for partners on GST/HST paid on certain expenses, using Form GST370, and must include a rebate received in income for the year received. Third, the GST/HST treatment of the rental supply itself, including whether short-term rental charges are taxable supplies and whether registration is required, is governed by the GST/HST rules and the CRA's GST/HST guidance, not by Guide T4036. This guide states no GST/HST registration threshold, no rate, and no short-term rental GST/HST conclusion, because those figures and conclusions could not be verified on a CRA GST/HST page. Read the CRA's GST/HST pages and the GST/HST guide on this site for the supply before filing a return that includes short-term rental income.
Complete Form T776 for the calendar year, property by property, and file it with your income tax and benefit return for that year. Enter the net income or loss from line 9946 on your return as the form and the return guide direct for that tax year: this guide states no return line number, because the line numbering on the return has changed across form versions and the current year's return guide governs. If the rental operation ended during the year, answer the final-year question on the form and complete the disposition and CCA areas that apply. If you received a GST/HST rebate for partners, report it as the guide directs for the year received, including the line 9974 treatment for the portion relating to expenses other than CCA and the UCC reduction for the portion relating to CCA.
Keep the records for six years from the end of the tax year they relate to, as Step 8's FAQ states, and do not send them with the return. If the CRA asks, the records must support every line: gross rents by property and unit, other income and its fair market value basis, each expense with its invoice or receipt, the personal-portion basis, the land and building cost split, the CCA class calculations year by year, the short-term rental day counts and compliance records, and the co-owner or partnership shares. An expense without a supporting document may be disallowed in whole or part. If you discover an error after filing, the correction route is an adjustment to the filed return for that year, not a compensating entry in a later year: rework the T776 for the year in error, keep the corrected calculation with the records, and file the adjustment through the CRA's adjustment process.
This guide states no GST/HST registration threshold, rate, or short-term rental taxability conclusion, because none could be verified on a CRA GST/HST page. It states no income tax rate, credit amount, or tax payable figure, because filing mechanics do not determine tax payable and no personalized tax advice is given here. It states no CCA rate beyond the class rates in Guide T4036, no accelerated-rate claim, and no principal-residence exemption figure, because the accelerated measures were described as proposed in the guide and the exemption turns on designation history. It states no return line number for the T776 result, because return line numbering has changed across versions. Where a figure is not stated, the guide points to the CRA page or guide that owns it instead of carrying a secondary source's number.
The Canada Revenue Agency encourages Form T776 but accepts other types of financial statements. Guide T4036 states that if you received income from renting real estate or other real property, you have to file a statement of income and expenses, and that even though the CRA accepts other types of financial statements, it encourages you to use [Form T776](https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t776.html), Statement of Real Estate Rentals, because the form includes areas for gross rents, rental expenses, and capital cost allowance. You only have to fill in the form if you have a rental operation and are reporting a rental income or loss. Using T776 keeps the line numbers, the personal-portion columns, the short-term rental charts, and the CCA calculation in the structure the CRA's guide explains, which makes an error easier to find and a later question from the CRA easier to answer.
No. The CRA states the limit in two places: the completing-T776 instructions say a taxpayer can claim CCA on the rented area only if it does not create or increase a rental loss and the building is not designated as a principal residence, and Guide T4036's worked example states Paul cannot claim CCA for more than his $1,100 net rental income before CCA because he cannot use CCA to create a rental loss, even though he would otherwise be entitled to $1,583.33. The limit is calculated across all your rental properties combined: combine the rental income and loss from all properties before claiming CCA. Any CCA you cannot use stays in the undepreciated capital cost balance for later years. You also do not have to claim the maximum in any year: you can claim any amount from zero to the maximum allowed, and an unclaimed amount remains available in the class balance.
No. Land is not depreciable property, and the CRA states you cannot claim CCA on its cost. When you acquire a rental property that includes both land and a building, enter in the CCA calculation only the cost that relates to the building, and enter the cost of land additions separately on the form's land line. Capital cost generally means the full cost of acquiring the property excluding land, plus the portion of legal, accounting, engineering, installation, and other fees that relate to buying or constructing the property excluding the part applying to land, plus additions or improvements not claimed as current expenses. Splitting the purchase price between land and building is therefore the first calculation in any CCA claim, and claiming CCA on the full purchase price including land is the error the CRA's instructions are written to prevent.
Report the rental portion separately from your personal use, on the same principles as a whole property. On Form T776 you enter the full amount of each expense in the total-expenses column and the part relating to personal use in the personal-portion column, and deductible expenses are total expenses minus the personal portion. The CRA's worked example shows a taxpayer entering 75% of property taxes, electricity, and insurance as the personal portion where three quarters of the property is personal use. CCA follows the same split: claim it only on the rented area, and be aware of the principal-residence consequences Guide T4036 sets out in its principal-residence chapter. If you change your principal residence to a rental property, you can elect not to be considered as having started to use it as a rental property, which avoids reporting a capital gain on the change in use, but if you make that election you cannot claim CCA on the property. Get the change-in-use and principal-residence rules from Guide T4036 before you claim CCA on a home you also live in.
The non-compliant portion cannot be deducted. Guide T4036 states that if you earn income from a short-term rental, you can deduct expenses relating to it unless they are a non-compliant amount, and that you cannot deduct the non-compliant amount of expenses or the non-compliant amount of CCA related to non-compliant short-term rentals. You calculate the amounts on Form T776's Chart A for expenses and Chart B for CCA, entering the results on lines 9366 and 9367, and deductible expenses are total expenses minus personal expenses minus the non-compliant amount. A non-compliant short-term rental is a short-term rental in a province or municipality whose rules the rental did not meet, as defined in Guide T4036's definitions, and the non-compliant amount is calculated by days under the formula in that definition. Compliance is a local question first: confirm the provincial and municipal rules for your property, including any registration or licence requirement, before you assume any short-term rental expense is deductible.
Generally six years from the end of the tax year to which the records relate. Guide T4036 states you must keep detailed records of all rental income and expenses, support purchases and operating expenses with invoices, receipts, contracts, and other supporting documents, and not send the records with the return but keep them in case the CRA asks to see them. The CRA may not allow all or part of your expenses if you do not have receipts or other documents to support them. Keep the lease or rental agreements, rent receipts and bank records showing rent received, invoices for every expense claimed, records splitting personal and rental use, the purchase documents splitting land and building cost, and the CCA calculations for each class year by year. Six years is the general rule: if a return is under review or an objection or appeal is open, keep the records until that process ends, following the CRA's keeping-records guidance.
Figures that could not be verified on an official page are not stated in this guide: all GST/HST registration thresholds, rates, and short-term rental taxability conclusions; all income tax rates, credit amounts, and tax-payable figures; any accelerated CCA rate claim under the proposed 2025 measures; any principal-residence exemption figure; and the return line number for the T776 net result. Check Guide T4036, the current Form T776, and the CRA's GST/HST pages linked above for current figures before you file.