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  • 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

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Author : Ryan Fujii
Ryan Fujii, CGA, provides professional accounting/taxation services to individuals and business owners locally and internationally.
 
Member of the Certified General Accountants Association of British Columbia and Canada Member of the Association of Fellow Chartered Certified Accountants
 
The J.M.Macbeth Award of merit from the Certified General Accountants Association of British Columbia
 
Active board member of the CGA Vancouver Chapter: Social chair, past Educational chair and past Professional Development chair