Landlord Guide: What Can I Claim Back On Taxes?

Whether you’re a seasoned property owner or just dipping your toes into the rental market, understanding the tax deductions available to you can significantly impact your bottom line. To help you navigate this complex terrain, we’ve put together a guide to the tax deductions you can claim on your rental property.

These expenses can be filed under Form T776 which can be accessed here. The Government of Canada also offers a resource to explain the process of filing the T776 form here.

Let’s dive into the details and explore how you can optimize your returns by making the most of these deductions.

1. What Forms Of Advertising Can I Deduct?

First on the list is advertising expenses. If you’ve promoted your rental property through Canadian television, newspapers or radio you’re in luck. These expenses are deductible. When it’s time to file your tax return, make sure to include the payments you’ve made for advertising for your rental property.

2. What Insurance Can I Deduct?

You can deduct the premiums you pay on your rental property for the current year. If your policy gives coverage for more than one year, deduct only the premiums related to the current year. You can deduct the remaining premiums in the year(s) to which they relate.

3. What Interest Can I Deduct?

The interest category offers various costs that you can claim. At the top of the list is the interest you’ve paid on the mortgage used to finance your rental property’s purchase. Be sure to include all costs associated with obtaining the mortgage, such as legal fees, mortgage application fees, and appraisal costs. However, remember not to include the mortgage principal, as it’s not deductible.

If you borrowed funds to finance improvements to your property, you’re in luck. These soft costs, used to finance construction, upgrades, and renovations that enhance your property’s value or its suitability for rent, are deductible. Full details on this deductible here.

4. What Management and Administration Fees Can I Deduct?

This category covers payments made to companies or individuals managing your rental property. It also includes fees paid to real estate agents for tenant acquisition and rent collection. If you’ve hired a property management company or an accountant to organize your rental property books, these fees are all deductible expenses.

5. What Motor Vehicle Expenses Can I Deduct

You can deduct motor vehicle expenses only when they are reasonable and you have receipts. You also have to keep records of the kilometres you drove for your rental properties and the total kilometres you drove in the year. You must also determine the total expenses paid for the vehicle in the year.

If you own one rental property – You can deduct reasonable motor vehicle expenses if you meet all of the following conditions:

• you receive income from only one rental property that is in the general area where you live
• you personally do part, or all, of the necessary repairs and maintenance on the property
• you have motor vehicle expenses to transport tools and materials to the rental property

You cannot deduct motor vehicle expenses you incur to collect rents. These are personal expenses.

If you own two or more rental properties – In addition to the expenses listed above, you can deduct reasonable motor vehicle expenses you incur to do any of the following:

• collect rents
• supervise repairs
• manage the properties

This applies whether your rental properties are located in or outside the general area where you live. Your rental properties have to be located in at least two different sites, away from your principal residence. The motor vehicle expenses that we consider to be reasonable depend on the circumstances of your situation.

For more information on motor vehicle expenses related to rental income, visit this link.

6. What Office Expenses Can I Deduct?

Office expenses include the cost of office supplies such as pens, paper, and stationery. These expenses can be claimed only if the purchases were made for business purposes and not personal use. Office expenses do not include items such as calculators, filing cabinets, chairs and desks. These are capital items.

7. What Other Expenses Can I Deduct?

Various other rental expenses, such as landscaping costs, condominium fees, vacant land expenses, and lease cancellation payments, are deductible, but each is subject to unique conditions. Full details can be found here.

8. What Prepaid Expenses Can I Deduct?

Prepaid expenses refer to expenses that have been paid in advance. When using the accrual method of accounting, you can recognize the prepaid expense in the year or years when you actually receive the associated benefit.

9. What Professional Fees (Legal and Accounting Included) Can I Deduct?

The fees you’ve incurred when hiring professionals to work for you can also be deducted. This category includes property management fees, legal fees (for tasks like lease preparation and rent collection), accounting fees (for bookkeeping and auditing), and consultancy fees. Generally, property management and other fees related to running your rental properties are deductible.

10. What Property Taxes Can I Deduct?

You can claim deductions for property taxes associated with your rental property during the period it was eligible for rent. This includes property tax deductions for both the land and the building on which your rental property is located. For additional details, please refer to the resources on vacant land and construction soft costs.

11. What Repairs, Maintenance, and Improvements Can I Deduct?

Expenses related to normal repairs and maintenance, such as fixing doors, windows, and painting, are considered current expenses and can be deducted in the year you incurred them. These expenses can significantly impact your income tax return.

On the other hand, improvements, especially those that add value to your property or extend its useful life, cannot be deducted in the year they were incurred. These improvements typically involve real estate enhancements like electrical wiring, lighting, plumbing, or property rebuilding projects.

12. What Travel Expenses Can I Deduct?

You can deduct travel expenses you incur to collect rents, supervise repairs and manage your properties. Travel expenses include the cost of getting to your rental property but do not include board and lodging, which are considered to be personal expenses. You must to meet the same requirements discussed in Motor Vehicle Expenses to claim the travel expenses you incur, yo

13. What Utilities Can I Deduct?

You can claim utilities related to your rental property, but the extent of the claim depends on whether you rent out the entire property or just a part of it. This includes things such as water, heat, cable, hydro.

Understanding and claiming these deductions can have a significant impact on your rental property’s profitability. Make sure to keep accurate records and consult with a tax professional to maximize your tax savings. Please visit this link to see full details on deductibles.

Check out some more guides for landlords below!

• How to Conduct a Credit Check on a Prospective Tenant
• Understanding Ontario’s 2023 Rent Increase Guideline: A Landlord’s Guide
• Unlock The Key To High Quality Tenants: Rental Listing Best Practices
• Landlord Guide: The Benefits of Verifying Your Rentals.ca Account
• Essential Tips for Screening and Selecting Reliable Tenants