This page walks through Form T776, Statement of Real Estate Rentals in the order you fill it in, using the line numbers in the CRA’s Guide T4036, Rental Income. It is part of WealthNorth’s real estate tax guides; the landlord tax guide gives the overview.
Step 1: Check that the T776 is the right form
Form T776 is for income from property. Renting space with only basic services (heat, light, parking, laundry facilities) is rental income; providing additional services such as cleaning, security and meals may make it a business, and the more services you provide, the more likely it is. A rental that is a business is reported with Guide T4002 instead. If you own any short-term rentals, the T776 has separate columns for them (see Airbnb and short-term rental tax).
Part 1 identifies you and the fiscal period. All rental properties have a December 31 year-end, so the period is the calendar year (or from the day you started renting, in your first year). If you co-own the property, the T4036’s rules for co-owners apply:
- The person who owns the rental property reports the income or loss.
- A co-owner's share of the rental income or loss depends on their share of ownership.
- Each co-owner enters the gross rental income of the whole property on line 12599, not split by ownership share.
- Co-owners fill in Part 2 of Form T776 with the details of the other co-owners.
- Co-owning a rental property as an investment doesn't make a partnership; a partnership needs a business carried on in common.
Step 2: Gross rental income (Part 3)
List the address of each rental property and the number of units you rented. Then enter:
| T776 line | What goes on it |
|---|---|
| 8141 | Gross rents for all units, paid in cash or by cheque |
| 8230 | Other income, such as the fair market value of rent paid in goods or services, or amounts for granting, extending or cancelling a lease |
| 8299 | Total gross rental income, which also goes on line 12599 of your return |
When rent and expenses count, from the T4036:
- With the accrual method, you report rent in the year you earn it, no matter when you receive it, and deduct expenses in the year you incur them, whether or not you pay them that year.
- With the cash method, you report rent in the year you receive it and deduct expenses in the year you pay them.
- You can use the cash method only if you have almost no amounts receivable and no expenses outstanding at the end of the year.
- You can use it only if your net rental income or loss would be almost the same under the accrual method.
Step 3: Expenses (Part 4)
Enter the full amount of each expense in the “Total expenses” column:
| T776 line | Expense |
|---|---|
| 8521 | Advertising |
| 8690 | Insurance |
| 8710 | Interest and bank charges |
| 8810 | Office expenses |
| 8860 | Professional fees (includes legal and accounting fees) |
| 8871 | Management and administration fees |
| 8960 | Repairs and maintenance |
| 9060 | Salaries, wages and benefits |
| 9180 | Property taxes |
| 9200 | Travel |
| 9220 | Utilities |
| 9281 | Motor vehicle expenses (not including capital cost allowance) |
| 9270 | Other expenses, such as condominium fees and landscaping |
Three rules decide what belongs in this part:
- Repairs or improvements. A rental expense that only restores the property to its original condition is usually a current expense, deducted in the year you pay it; one that improves the property beyond its original condition, extends its life, gives a lasting benefit or replaces a separate asset is usually a capital expense, added to a CCA class instead. Capital costs are claimed as capital cost allowance in Step 5, not here.
- Interest. Interest is deductible when the borrowed money is used to earn income from a business or property, such as rent, interest or dividends, whatever secures the loan; it follows the money's current use, which you must be able to trace, and it isn't deductible on money used personally, on money borrowed for an RRSP, TFSA or FHSA contribution, or on an investment that can only produce capital gains. Only the interest is deductible, not repayments of mortgage principal.
- Vehicle and travel. Vehicle costs for a rental are deductible only in limited cases: with one rental property, only if it is in the general area where you live and you do repairs or maintenance yourself and drive tools and materials there (driving to collect rent is a personal expense); with two or more rental properties at two or more different sites away from your home, also to collect rent, supervise repairs and manage the properties. Other travel to a rental follows the same conditions.
If you rent part of the home you live in, the personal part of each expense goes in the “Personal portion of total expenses” column, totalled on line 9949: When you rent out part of the home you live in, you deduct the expenses that relate only to the rented area in full and a share of the expenses for the whole property, split by square metres or by the number of rooms you rent. The deductible expenses are the total minus the personal portion (and minus any short-term rental expenses that can’t be deducted, explained in the Airbnb tax guide). Each expense is explained in rental property expenses you can deduct.
Step 4: Net income before CCA
Line 9369 is gross income (line 8299) minus the deductible expenses: the net rental income of all the owners before any capital cost allowance. A co-owner then enters their share of it: A co-owner's share of the rental income or loss depends on their share of ownership. They also enter any deductible expenses they had as a co-owner that weren’t deducted elsewhere.
Step 5: Capital cost allowance, recapture and terminal loss
CCA is worked out in Area A of the form, and the total claim goes on line 9936. Capital cost allowance (CCA) is optional and is worked out after combining the net income or loss of all your rental properties: it can bring that net rental income down to zero, but it can't create or increase a rental loss. The classes and rates are explained in CCA on rental property.
In the year you sell or otherwise dispose of a rental building, Area A can show a recapture or a terminal loss instead:
- If the proceeds from the property you sell are more than the undepreciated capital cost (UCC) of its class, the difference is recaptured CCA, added to your income in full rather than at the capital gains inclusion rate.
- The proceeds counted are the lower of the sale price (minus selling costs) and the property's original capital cost, so the recapture can't be more than the CCA claimed.
- If no property is left in the class at the end of the year and part of the UCC hasn't been deducted, that remainder is a terminal loss, deductible from your rental income in the year of the sale.
- Unlike CCA, a terminal loss can create a rental loss.
Recaptured CCA goes on line 9947 and a terminal loss on line 9948. The capital gain, if any, is reported separately on Schedule 3; see capital gains on rental property.
Step 6: Carry the result to your return
| Step | Line | Amount |
|---|---|---|
| Gross rental income | 8299 | $24,000 |
| Deductible expenses | $18,500 | |
| Net income before CCA | 9369 | $5,500 |
| CCA claimed (no more than the line above) | 9936 | $3,000 |
| Net income | 9946 | $2,500 |
The amount on line 9946 goes on line 12600 of your return, where it is added to your other income (or, for a loss, reduces it). A rental loss can be deducted from your other income only if you incurred the expenses to earn income: you can't claim one when you rent to someone you know for less than you'd charge a stranger, when a family member or housemate only shares costs, or when renting part of your home has no reasonable expectation of profit. The rental income tax calculator estimates the tax on the result.
Mistakes the guide warns about
| Mistake | What the T4036 says |
|---|---|
| Deducting mortgage principal | Repayments of principal aren’t deductible; only the interest is |
| Deducting the value of your own work | You can’t deduct the value of your own services or labour |
| Deducting an improvement as a repair | Capital expenses are claimed as CCA, not deducted in the year |
| Expenses without receipts | The CRA may not allow all or part of expenses you can’t support with receipts or other documents |
| Claiming a loss when a relative only shares costs | A small amount that a family member or someone else living with you pays toward upkeep or groceries is cost-sharing, not rent: you don't report it and can't claim rental expenses or a loss. |
Related reading
Sources
The figures and rules on this page come from these sources, last checked against them on October 1, 2026. How we check facts.
- Canada Revenue Agency: Rental Income
- Canada Revenue Agency: Line 22100 – Carrying charges, interest expenses and other expenses
- Canada Revenue Agency: Income Tax Folio S3-F6-C1, Interest Deductibility