Investment Property Expenses: What's Tax Deductible?
Author:
Ryan Fujii
Date: June 1, 2015
If you receive income from renting real estate
or other real property, a T776 Statement of Real Estate Rentals is
used to report your rental income and expenses. It is an integral
part of your personal tax return. You will be able to deduct
reasonable expenses of your rental property to earn rental income.
What expenses you can deduct? Here is a list of expenses for your
rental property:
Advertising
Advertising that your rental property is available for rent.
Insurance
Premiums for insurance coverage on your rental property for the current year.
Capital Cost Allowance CCA
To be discussed further in next topic
Interest
Interest on money your borrow to buy or improve your rental
property.
Interest you paid to tenants on rental deposits.
Loan fees included: These fees can be deducted over a period
of five years
Mortgage applications, appraisal, processing, and insurance
fees
Mortgage guarantee fees
Mortgage brokerage and finder's fee
Legal fees related to mortgage financing
Office expenses
Cost of office expenses. These include small items such as
pens, pencils, stationery, etc.
Legal, accounting, and other professional fees
Legal service to prepare leases or collect over due rents
Accounting fees include bookkeeping, audits of your records,
and preparing financial services. Also, you may be able to deduct
fees and expenses for advice, along with help in preparing your income tax
return and any related information schedules.
You cannot deduct legal fees to buy your
rental property. They should be allocated between land and building
and added to their respective cost.
Management and administration fees
Property management fees
Fees paid to agents for collecting rents or finding new
tenants.
Maintenance and repairs
Fees for property repairs.
You cannot deduct the value of your own
labour
Salaries, wages, and benefits
Fees paid to superintendents, maintenance personnel, and
others you employ to take care of your rental property
You cannot deduct the value of your own
labour
Property taxes
Property taxes assessed by a provincial or territory and by
a Canadian municipality, that related to your rental property for
the period when it is available for rent.
Travel
Travel expense to collect rents, supervise
repairs, and manage your properties. This includes the cost of
getting to your rental property.
You cannot deduct board and lodging, which Canada Revenue Agency consider to be personal expenses.
Utilities
Utilities, such as gas, electricity, water, and cable if you pay for them according to your rental agreement.
Motor vehicle expenses
In order to deduct motor vehicle expenses, you need to meet
all the following conditions:
1.You receive income from only one rental property that is in
the general area where you live
2.You personally do part, or all, of the necessary repairs and
maintenance on the property
3.You have motor vehicle expenses to transport tools and
materials to the rental property.
4.You cannot deduct motor vehicle expenses
you incur to collect rents. These are personal expenses.
Other expenses
Landscaping costs
Cost of landscaping the grounds around your rental property
Condominiums
Condominium fees representing your share of the upkeep,repairs, maintenance, and other current expenses of the common property if you earn rental income from a condominium units.
CURRENT EXPENSES YOU CANNOT DEDUCT
Land transfer taxes - add these amounts to the cost of the
property
Mortgage principal
Tax penalties
You cannot deduct legal fees to buy your
rental property. They should be allocated between land and building
and added to their respective cost.
You cannot deduct the value of your own
labour
You cannot deduct board and lodging, which
Canada Revenue Agency consider to be personal expenses.
You cannot deduct motor vehicle expenses
you incur to collect rents. These are personal expenses.
Disclaimer: This summary is not, and is not intended to be, tax
advice to any particular individual. Please seek tax advice from your
tax professional.
Income Expenses Taxes Deductibles