Mar 3, 2026
If you own a rental property in Canada, you already know the income is taxable. But are you aware of all the deductions available to offset that income? Not claiming all costs and all tax deductions is how many landlords end up leaving money on the table.
With the Canada Revenue Agency (CRA) tightening its rules around short-term rentals (1) and a shifting mortgage-rate environment making cash flow tighter than ever, understanding exactly what you can write off has never been more important.
When it comes to tax write-offs for landlords, expenses are generally categorized into two types: current expenses and capital expenses.
Understanding what you can claim as a real estate investor
Not all landlord expenses are treated equally by the Canada Revenue Agency (CRA) — and knowing the difference could significantly change how much tax you owe.
To start, you’ll need to understand the difference between current expenses and capital deductions.
Current expenses recur periodically. For example, repainting a unit before a new tenant moves in, fixing a leaky faucet or servicing a furnace.
Capital expenses are lasting improvements that raise the property's value. For example, replacing all windows with energy-efficient models, adding a finished basement suite or installing a new roof.
Real estate investors should know that the original purchase price of the rental property and the legal fees tied to that purchase are also considered capital expenses.
The standard deductions on rental income
There is a standard list of deductions real estate investors should consider using to reduce income tax owed in each calendar year. According to the CRA (2), here is a list of expenses landlords can deduct on their Statement of Real Estate Rentals (T776):
Advertising: Costs to attract tenants, from listing on platforms like Kijiji or Facebook Marketplace to signage.
Condominium fees: Relevant for a large and growing segment of Canadian landlords who own condo units. Monthly condo/strata fees are deductible as a current expense.
Heat: Listed separately by the CRA from general utilities and worth naming explicitly, as confusion about what "utilities" includes is common.
Insurance: Premiums paid for your rental property — including any coverage for employees, such as disability or accident insurance.
Interest on money borrowed to purchase depreciable property: A nuance the article doesn't address: you can deduct interest on funds borrowed to buy equipment or furniture used in the rental property, not just the property itself.
Landscaping costs: Deductible as a current expense when maintaining existing grounds. The CRA specifically lists this separately from general repairs and maintenance.
Management and administration fees: Beyond property management costs, financial institution fees — such as mortgage administration charges or a safety deposit box used for rental business records — are also claimable.
Mortgage interest: The interest portion of your mortgage payments is deductible — the principal is not. In the early years of a mortgage, when interest makes up the bulk of each payment, this can be one of your largest single deductions.
Office expenses: Small items such as pens, paper, stamps and stationery, provided they're for business use only. Larger items such as computers or desks are treated as capital expenses.
Professional fees: Legal fees for preparing leases or collecting overdue rents, accounting fees for bookkeeping or preparing financial statements and, in some cases, income tax preparation fees.
Property management fees: Amounts paid to a management company, superintendent or maintenance personnel — including real estate agents who collect rents or find tenants.
Property taxes: Deductible for the period the property is available for rent.
Repairs and maintenance: Costs to maintain the property in good condition. Note: improvements that extend the property's life or raise its value are capital expenses, not current ones.
Travel expenses: Beyond vehicle costs, landlords can claim airfare, hotels and meals (at 50%) when travelling to inspect or manage a rental property located in another city or province. Keep in mind, the trip’s primary purpose must be the rental property.
Utilities: Gas, electricity, water and cable — if your rental arrangement specifies that you, the landlord, pay for them.
But these aren’t the only deductions landlords need to consider.
Deducting your vehicle costs as a landlord
Another deduction to consider is vehicle expenses incurred due to being a landlord. Unfortunately, these expenses are not as cut and dried as some other tax deductions.
In general, the CRA allows you to deduct travel expenses to collect rents, supervise repairs and manage your properties; however, if you incur meal costs or lodging costs — say you had to pay for a hotel room to visit the rental property — these costs cannot be used as a tax deduction.
Landlords with just one rental property
One caveat is that vehicle expenses cannot be deducted if you own only one rental property unless you meet all three of the following conditions:
- You only have one rental property and live fairly close to it
- You do part or all of the maintenance on the property yourself
- You used your own vehicle to transport tools and building materials to the rental property
If you own two or more rental properties, vehicle expenses related to collecting rents or supervising repairs across those properties become deductible (even if you don’t meet the following conditions).
Short-term rentals: New rules every landlord must know
With platforms like Airbnb and Vrbo making short-term rentals a familiar income stream for Canadians, the tax rules in this area have tightened significantly — and the stakes for getting it wrong are high.
Beginning with the 2024 tax year, the CRA will deny all expense deductions for non-compliant short-term rentals (3).
A short-term rental is defined as a residential property rented for fewer than 90 consecutive days. It is considered non-compliant if it operates in a province or municipality that prohibits short-term rentals, or if it fails to meet all required registration, licensing and permit requirements.
This is not a small technicality.
Consider a landlord earning C$25,000 in short-term rental income with C$10,000 in eligible expenses. If compliant, they pay tax on C$15,000. If non-compliant, they are taxed on the full C$25,000 — a costly mistake that a growing number of Airbnb hosts are discovering the hard way.
For 2025 and beyond, the CRA pro-rates expenses based on the number of compliant versus non-compliant days in the year (4). Platforms like Airbnb and Vrbo are also now required to report host earnings directly to the CRA annually — so there is nowhere to hide.
As always, the first step to determining what you owe is determining whether your income is rental or business income.
If you provide only basic lodging, it's rental income, and you file a T776.
If you offer additional services — meals, regular housekeeping, concierge — it may qualify as business income, which requires Canada Pension Plan (CPP) contributions and a different reporting process.
Capital gains: What's changed
When you sell a rental property, any capital gain is taxable — unlike the profit (aka: capital gain) you earn when you sell your principal residence, which is generally sheltered by the principal residence exemption (PRE).
As of 2026, a capital gain is only taxed on 50% of the gain (based on your marginal tax rate). For instance, if you sold a property at a $100,000 profit, you would only owe tax on 50%, or $50,000.
In 2025, there was a proposed increase to the capital gains inclusion rate — from 50% to 66% on gains above C$250,000 for individuals; however, this increase to the capital gains inclusion rate was cancelled by the federal government in March 2025 (5). The inclusion rate remains at 50% for now.
Property flipping rules
Separate from the inclusion rate, property flipping rules are being actively enforced. If you sell a rental property within 365 days of acquiring it, the CRA may treat the gain as ordinary income rather than a capital gain — and the principal residence exemption will not apply (6) even if you lived in the home.
The difference between ordinary income and capital gains can be quite significant, from a tax perspective.
To illustrate, assume the profit on a rental property sold in 2025 was $100,000 and, as an Ontario resident, you earned $60,000 in employment income. If you paid ordinary income tax, then your taxable income for 2025 would be $160,000 and, assuming no deductions, you’d owe just over $45,100 in tax.
If that profit was taxed as a capital gain and assuming as an Ontario resident you earned $60,000 in employment income and had no deductions, then the tax owed would be closer to $24,000 — putting more than $20,000 back in your pocket.
Bottom line
Rental property can still be a smart long-term investment — but the margin for error is thinner than it was a few years ago.
Higher carrying costs, rising vacancies and tighter CRA rules around short-term rentals mean that leaving deductions on the table isn't just careless, it's costly.
The landlords who come out ahead are the ones who treat tax planning as part of the investment strategy, not an afterthought at filing time. When in doubt, work with a qualified tax adviser who understands real estate — the fee is, after all, deductible.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Canada Revenue Agency: Changes to rules for eligible deductions from short-term rental income (1); Canada Revenue Agency: Rental expenses you can deduct (2, 3); CMHC: Canada's vacancy rate rises amid historically high rental construction (4); Bank of Canada: Policy interest rate / Mortgage rate data (4); Scotiabank Wealth Management: Cancellation of the proposed capital gains inclusion rate increase (5, 6)
Romana King is the Senior Editor at Money.ca. She writes for various publications, and her book -- House Poor No More: 9 Steps That Grow the Value of Your Home and Net Worth -- continues to be an Amazon bestseller. Since its publication in November 2021, this book has won five awards, including the New York CPA Society's Excellence in Financial Journalism (EFJ) Book Award in 2022.
