In Canada, in every province there are many things that be deducted from your rental income for tax purposes.
Here is a brief list of things you can deduct followed by a few things you can’t deduct.
What You Can Deduct
1. Interest on your mortgage
If your rental property has a mortgage, you can’t deduct the principal you’re paying back, but you can deduct the interest in your mortgage payment. Also, if you’re living in the property, too, and renting out part of it, but the whole building has a mortgage, then you can only deduct the portion that applies to the rental part.
If your rental agreement stipulates that you as the landlord are paying for things like water, gas, cable, and the like, then these costs can be deducted from your rental income.
You can deduct the property insurance for your rental property or the portion of your insurance that applies to the rental property if you are also living in the home/building and you’re paying for your quarters and the rental property together as one amount.
What You Cannot Deduct
1. Mortgage principal
See above. You can deduct the interest on the mortgage, but not the principal. So, you cannot deduct the whole payment.
2. Costs of your own labor
If you do the fix-it work on your rental property yourself, you can’t deduct what you pay yourself (if anything).
3. Tax penalties
Should you wind up paying any tax penalties to Revenue Canada related to your rental property, you cannot deduct them.
If you are baffled by deductions from rental income contact us, and we can help you. The more properties you own that have rental income, the more complicated this becomes for tax purposes.
For purposes of space, we haven’t listed every potential deduction, and, not everything in these lists is perfectly black and white. It’s a good idea to discuss these deductions with a professional accountant.
As always, for anything related to taxation including on rental income, keep excellent, thorough, and tidy records.
If you have any questions about this article or taxation on rental income, in general, or you want to make an appointment with an accounting professional at Naicker & Associates, please contact us at (604) 469-9369. We are based in Port Moody, BC.