Rental Property Expenses You Can Deduct in Canada (2026)

What Makes a Rental Expense Deductible

CRA allows you to deduct “reasonable” expenses incurred to earn rental income. The expense must be:

1. Directly related to earning rental income from the property
2. Not a capital expenditure (repairs yes; improvements no, generally)
3. Supported by documentation (receipts, contracts, bank records)

Deductible expenses are reported on Form T776 (Statement of Real Estate Rentals) and reduce your net rental income — or create a rental loss if expenses exceed income.

Fully Deductible Current Expenses

These expenses are deducted in full in the year they are paid:

Advertising

• Rental listing fees (Kijiji, Rentals.ca, etc.)
• Signage for the rental unit
• Cost of running newspaper or online ads
• Fees paid to a rental agent to find tenants

Insurance

• Fire and property insurance premiums
• Liability insurance on the rental property
• Rent default insurance (e.g., if you purchase renter income protection)

Note: If the property has personal use as well as rental use, only the rental portion of insurance is deductible.

Interest on Borrowed Money

• Mortgage interest — the interest component of your mortgage payments (not principal)
• Interest on a home equity line of credit (HELOC) used to fund the rental property
• Interest on a loan used to purchase appliances or make repairs to the rental

Keep your annual mortgage statement — it breaks down interest vs. principal paid each year.

Maintenance and Repairs

• Routine maintenance: lawn care, snow removal, cleaning between tenants
• Minor repairs: replacing a broken lock, fixing a leaky faucet, patching drywall
• Appliance repair (not replacement with a substantially better appliance)
• Painting and repainting

Key rule: The work must restore the property to its original condition. It cannot extend the useful life or add a new capability.

Management and Administration Fees

• Property management company fees (typically 8–12% of gross rent)
• Superintendent or caretaker wages (including CPP/EI)
• Bookkeeping or accounting fees for the rental business
• Legal fees for drafting or reviewing leases, or pursuing rent recovery

Motor Vehicle Expenses

If you use your vehicle to collect rents, supervise repairs, or manage the property:

• Actual cost method: track vehicle expenses (gas, insurance, maintenance, depreciation) and deduct the rental-use percentage
• Mileage log is required — record date, destination, purpose, and kilometres

Office Expenses

• Postage and courier for tenant communications
• Stationery and record-keeping supplies
• Portion of home office used exclusively and regularly for managing rentals

Professional Fees

• Accountant fees specifically for rental income tax filing
• Legal fees for lease disputes, eviction applications, or property purchase issues
• Appraisal fees if required by a lender

Property Taxes

• Municipal property taxes billed by the municipality
• Local improvement levies (if for ongoing services, not capital improvements)
• Business improvement area levies if applicable

Salaries and Wages

• If you employ someone to maintain or manage the rental property
• Deductible at the gross wage — you must also remit CPP, EI, and income tax withheld to CRA

Other Expenses

• Mortgage discharge penalties (when selling or refinancing due to the rental nature)
• Utilities paid by the landlord (heat, electricity, water)
• Landscaping to maintain existing condition
• Condominium maintenance fees (routine portion; see capital improvement note below)

The Repairs vs. Capital Improvements Distinction

This is the most commonly misunderstood rental expense rule. CRA distinguishes:

The test: Did the work restore the property to original condition (repair), or did it add value, extend useful life, or add a new feature (capital improvement)?

A gray area: replacing an old roof. If the original roof was functional and the new roof is a similar standard, CRA will often accept it as a current repair. If you upgrade from asphalt shingles to a metal roof with a 50-year lifespan, CRA may argue it is a capital improvement.

When CRA audits rental expenses, the repair vs. improvement line is one of the first things they examine. Keep documentation: quotes and invoices showing the work was remedial rather than improvement-based.

What CRA Does Not Allow

Mortgage principal — Only interest is deductible.

Land — You can depreciate the building component of a rental property but not the land. When you calculate CCA, you exclude the land value.

Personal-use expenses — If you use the cottage yourself in summer and rent it out in fall, only expenses during rental periods (or the proportionate share of year-round expenses) are deductible.

Traffic fines and penalties while travelling to the property.

Capital expenditures deducted as current expenses — CRA can reassess capital improvements you claimed as repairs, treating the disallowed amount as an ACB addition instead.

Expenses that are not reasonable — CRA has authority to disallow expenses they deem unreasonable relative to the rental income earned.

CCA (Capital Cost Allowance) — Depreciating the Building

CCA is how you claim depreciation on the rental building itself (not land) and capital improvements over time. The rental building is typically Class 1 at 4% declining balance per year.

Important CCA trap: When you sell the property, any CCA you have claimed is subject to recapture — taxed as income in the year of sale, not as a capital gain. This can create a large surprise tax bill. Recaptured CCA is taxed at your full marginal rate, not the preferred capital gains rate.

Many tax advisors recommend only claiming CCA when you know you will hold the property long-term, or when the tax deferral benefit outweighs the future recapture cost.

See [cca-on-rental-property-canada.md] for detailed CCA strategy.

Deductible Expenses Worksheet

Record-Keeping Requirements

CRA requires you to keep rental income and expense records for at least six years from the end of the tax year to which they relate. Keep:

• Lease agreements and amendments
• Rent receipts and payment records (bank statements, e-transfer records)
• All expense receipts and invoices (digital copies are acceptable)
• Mortgage statements showing interest breakdown
• Property tax bills
• Insurance policies and premium receipts
• Contractor invoices and correspondence for repairs
• Mileage log if claiming vehicle expenses