On this page, you will find information on the following:
- Land transfer taxes
- Mortgage principal
- Penalties
- Value of your own labour
- Personal portion of expenses
Land transfer taxes
You cannot deduct land transfer taxes you paid when you bought your property. Add these amounts to the cost of the property.
Mortgage principal
You cannot deduct the repayments of principal on your mortgage or loan on your rental property. For information about the interest part of your mortgage, go to Line 8710 – Interest and bank charges.
Penalties
You cannot deduct any penalties shown on your notice of assessment or notice of reassessment.
Value of your own labour
You cannot deduct the value of your own services or labour.
Personal portion of expenses
If you rent part of the building where you live, you can claim the amount of your expenses that relate to the rented area of the building. You have to divide the expenses that relate to the whole property between your personal part and the rented area. You can split the expenses using square metres or the number of rooms you are renting in the building.
For example, if you rent 4 rooms of your 10-room house, you can deduct:
- 100% of the expenses that relate only to the rented rooms, such as repairs and maintenance of the rooms; plus
- 40% (4 out of 10 rooms) of the expenses that relate to the whole building, such as taxes and insurance
If you rent rooms in your home to a lodger or roommate, you can claim all of the expenses for the part you are renting. You can also claim a portion of the expenses for the rooms in your home that you are not renting and that both you and your lodger or roommate use. You can use factors such as availability for use or the number of persons sharing the room to calculate the allowable expenses. You can also calculate these amounts by estimating the percentage of time the lodger or roommate spends in these rooms (for example, the kitchen and living room).
Fill in "Part 4 – Expenses" on Form T776as follows:
- enter the full amount of each expense under "Total expenses"
- enter the part of each expense that was for personal use under "Personal portion"
- add up the amounts ineach columnand entertheresult for "Total expenses" on amount A, and enter the "Personal portion" on line 9949
- subtract the personal portion total from the total expensesto get your totaldeductible expense. Enter this resulton amount 4
If you are a co-owner or member of a partnership,enter the personal portion of the expenses for all co-owners or partners on line 9949.
You cannot claim the expenses for renting part of your property if you have no reasonable expectation of making a profit.
For more information on renting part of your personal residence, go to Changing part of your principal residence to a rental property or vice versa.
Patrick rents out 3 rooms of his 12-room house. He is not sure how to split the expenses when he reports his rental income. His expenses were property taxes, electricity,insurance and the cost of advertising for tenants in the local newspaper.
Patrick can claim the part of his expenses that relate to the area of the property he rented in the current tax year. Since he rented 25% of his residence (3 out of 12 rooms), he can deduct 25% of his property taxes, electricity, and insurance costs from his rental income. He can deduct the full amount of the advertising expense, since this expense relates only to the rented area.
When he completes FormT776, Patrick enters the full amount of each expense in the “Total expenses” column. Then, in the “Personal portion” column, he shows the part of each expense that relates to his personal use. In this case, he enters75% of the property taxes, electricity and insurance costs for the property. He will not enter anything for advertising in the “Personal portion” column.
Patrick can also claim capital cost allowance (CCA) on the rented area of the property if it does not create or increase a rental loss and he is not designating the building as his principal residence.
Forms and publications
- Guide T4036, Rental Income
- Form T776, Statement of Real Estate Rentals
Related links
- Determining the capital cost of property in special situations
- Rental expenses you can deduct
FAQs
Travel to and from the rental property for maintenance/management purposes. Property management fees. Legal fees for evictions or other rental issues. Utilities if paid by the landlord.
What is not deductible as a rental expense? ›
Expenses related to traveling to make improvements or renovations to a rental property aren't tax-deductible as these costs are recoverable through depreciation. However, your client may be able to deduct other standard expenses like printing, office supplies, advertising costs, and insurance costs.
Why can't I deduct my rental property losses? ›
Rental Losses Are Passive Losses
This greatly limits your ability to deduct them because passive losses can only be used to offset passive income. They can't be deducted from income you earn from a job or investments such as stock or savings accounts.
Can I write off appliances for rental property? ›
Can you write off appliances for rental property? Yes, you can deduct the cost of appliances for your rental property. However, for larger items typically over $2,500, you will depreciate the cost over the IRS approved life of the appliance.
Can you write off mortgage payments on rental property? ›
As a rental property owner, you can claim deductions to offset rental income and lower taxes. Broadly, you can deduct qualified rental expenses (e.g., mortgage interest, property taxes, interest, and utilities), operating expenses, and repair costs.
Can I write off a rental car expense? ›
The short answer is—You can deduct your rental car fees but not your mileage when you use a rental car to drive for rideshare or delivery. The standard mileage deduction is intended for use on cars that you own or lease, not on cars that you rent.
What is considered a non deductible expense? ›
With this in mind, a non-deductible business expense is any expense that does not meet the IRS' criteria of being both ordinary and necessary to your business, and which cannot be written off to lower the amount of taxes your business owes for the year.
What is the $25,000 rental loss limitation? ›
Special $25,000 Allowance for Real Estate Nonprofessionals
This means you can deduct up $25,000 of rental losses from your nonpassive income, such as wages, salary, dividends, interest and income from a nonpassive business that you own.
What are unallowed losses on rental property? ›
Rental activity is normally considered a passive activity. Because of this, any losses on rental property that cannot be offset by rental property income are disallowed (“unallowed”). Unallowed losses are not deductible in the current year but can be carried forward to future years to offset future passive income.
What is the IRS rule on rental property losses? ›
If your gross adjusted income is $100,000 or less, you may deduct up to $25,000 of rental losses. But for you to use this allowance, you must actively participate in the rental, among other conditions. As your income increases, the amount you're able to deduct decreases.
Cell phone and internet services related to managing the rental property are tax deductible.
Can I deduct computer for rental property? ›
You can also take rental property depreciation on any equipment used to run your rental business, like a computer, car, lawn mower, furniture, property renovations, etc. For an expense to be a deductible expense you can depreciate, it must be expected to last for more than a year.
What happens if my expenses are more than my rental income? ›
If your rental expenses exceed rental income your loss may be limited. The amount of loss you can deduct may be limited by the passive activity loss rules and the at-risk rules. See Form 8582, Passive Activity Loss Limitations, and Form 6198, At-Risk Limitations, to determine if your loss is limited.
Can you deduct homeowners insurance on rental property? ›
Here's the skinny: You can only deduct homeowner's insurance premiums paid on rental properties. Homeowner's insurance is never tax deductible your main home. It's possible that some homeowners are thinking of the home mortgage interest deduction.
How does the IRS know if I have rental income? ›
Ways the IRS can find out about rental income include routing tax audits, real estate paperwork and public records, and information from a whistleblower. Investors who don't report rental income may be subject to accuracy-related penalties, civil fraud penalties, and possible criminal charges.
Can you deduct rental expenses when you have no rental income? ›
If the house is not being rented, there are still many deductions available. Maintenance and repairs are deductible. Additionally, marketing expenses for the rental are deductible as well. Marketing costs include any expenses associated with renting out the home.
What is not a tax-deductible expense? ›
Non-deductible business expenses are those that cannot be used as a tax write-off. This includes expenses like entertainment, meals, and travel. These types of expenses are considered personal in nature and are not deductible.
What is not considered a deductible moving expense? ›
You can deduct the expenses of moving your household goods and personal effects, including expenses for hauling a trailer, packing, crating, in-transit storage, and insurance. You can't deduct expenses for moving furniture or other goods you bought on the way from your old home to your new home.
What is considered a rental expense? ›
Rent expense is the cost a business pays to occupy a property for an office, retail space, storage space, or factory. For a retail business, rent expense can be one of its biggest operating expenses along with employee wages and marketing costs.
Which of the following expense items are deductible as rental expenses? ›
Deductions are only available for expenses related to renting your property, like repairs and maintenance costs, mortgage interest payments, homeowners' insurance premiums, and property taxes. These are all common deductible items.