Form T776, Statement of Real Estate Rentals, is where most individual landlords in Canada report rental income and expenses. The form itself is short. What takes time is deciding which line each expense belongs on, and that's far easier if you sort expenses that way all year. This guide walks through the lines using the descriptions in CRA's rental income guide (T4036).
Income lines
| Line | What goes there |
|---|---|
| 8141 | Gross rents for all units |
| 8140 | Total gross rents from short-term rentals, reported separately |
| 8230 | Other income, such as rent paid in kind or through services (at fair market value) and lease premiums |
| 8299 | Total gross rental income |
Most landlords use the accrual method, which CRA says applies in most cases: rent is income in the year it's due, whether or not it was paid. CRA allows the cash method only if the result would be almost the same.
Expense lines
| Line | Category | Typical examples | Watch for |
|---|---|---|---|
| 8521 | Advertising | Listing fees, signs, online ads for vacancies, finder's fees | Claim each cost once; agent fees for finding tenants are also described under line 8871 |
| 8690 | Insurance | Building and liability insurance for the rental | A multi-year premium is spread over the years it covers |
| 8710 | Interest and bank charges | Interest on money borrowed to buy or improve the rental; interest paid to tenants on deposits | Principal repayments aren't deductible; loan fees are deducted over five years |
| 8810 | Office expenses | Pens, stamps, stationery and other small supplies | Desks, chairs and filing cabinets are capital, not office expenses |
| 8860 | Professional fees | Accounting fees, legal fees for collecting rent or preparing leases | Legal fees for buying the property are part of its cost |
| 8871 | Management and administration fees | Property management fees; fees paid to agents for collecting rents or finding new tenants | Fees should match the management agreement |
| 8960 | Repairs and maintenance | Labour and materials for repairs that restore the property | Your own labour isn't deductible; improvements are capital |
| 9060 | Salaries, wages and benefits | A superintendent, caretaker or maintenance employee | You can't deduct a salary to yourself |
| 9180 | Property taxes | Municipal property tax on the rental | Taxes for the personal-use part of a property aren't deductible |
| 9200 | Travel | Travel to collect rent, supervise repairs and manage properties | Board and lodging aren't deductible |
| 9220 | Utilities | Gas, oil, electricity, water and cable you pay under the rental arrangement | Utilities tenants pay directly aren't your expense |
| 9281 | Motor vehicle expenses (excluding CCA) | Fuel, insurance and maintenance for rental-related driving | Special rules for one property vs two or more (below) |
| 9270 | Other expenses | Rental expenses that don't fit another line | Use it sparingly and describe what's in it |
After the expense lines come the calculations: CCA on line 9936, the personal portion of expenses on line 9949, and your net income or loss on line 9946, which carries to your return.
Motor vehicle expenses: one property or two?
CRA's rules here are narrower than many landlords expect.
- One rental property: you can deduct reasonable vehicle expenses only if the property is in your general area, you do part of the repairs yourself, and you use the vehicle to carry tools and materials. Driving over to collect rent doesn't qualify.
- Two or more rental properties: you can also deduct reasonable costs of driving to collect rents, supervise repairs and manage the properties, provided the properties are in at least two different sites away from your home.
Keep a simple log of trips: date, destination, purpose and kilometres. It's the record CRA would ask for.
Interest and the mortgage
Mortgage payments mix interest and principal. Only the interest goes on line 8710, and the figure should match your lender's annual statement. Canadian fixed-rate mortgages compound semi-annually, so a spreadsheet using the annual rate divided by 12 will drift from the lender's numbers; our mortgage renewal guide explains the calculation.
Renting part of your own home
If you rent out a basement suite or a room, only the share of shared expenses that relates to the rented part is deductible. CRA allows the split to be based on area (square metres) or on the number of rooms rented, and the personal portion is removed on line 9949. Expenses that relate only to the rented area, such as repainting the suite, can be claimed in full.
Mistakes that lead to questions
- Claiming the whole mortgage payment instead of the interest.
- Putting a new appliance or a renovation under repairs and maintenance.
- Claiming vehicle costs for a single property when the conditions aren't met.
- Deducting land transfer tax or legal fees from the purchase.
- Claiming the value of your own labour.
- A large, unexplained amount on line 9270.
- Expenses for the personal-use part of a property left in.
Sorting as you go
- Assign a T776 line to every expense when you record it.
- Keep the receipt or invoice with the entry.
- Split utilities by type if your accountant wants them that way.
- Flag anything that might be capital for your accountant to review.
- Run a statement by T776 line quarterly, so surprises appear in April of the same year, not April of the next.
In Propvara
Propvara's operating statement uses categories aligned with T776 lines 8521 to 9281, with gross rents on 8141, utilities broken out by type, and mortgage interest separated from principal. When you capture a bill from a photo or PDF, it suggests the category and a person confirms it before anything is recorded.
Sources
This article is general information for Canadian landlords and managers, not legal, tax or financial advice. Rules vary by province and change over time.