After knowing how to calculate your rental income, you would like to know what you can claim as rental expenses. You can deduct any reasonable expenses you incur to earn rental income, including:
Advertising
You can claim advertising that your rental property is available for rent as rental expenses.
Insurance
You can deduct the premiums for insurance coverage on your rental property for the current year. If your policy gives coverage for more than one year, you can deduct only the premiums as rental expenses that relate to the current year. Deduct the remaining premiums in the year or years to which they relate.
Interest
You can claim interest on money you borrow to buy or improve your rental property as rental expenses.
You might refinance your rental property to get money for a reason other than buying or improving your rental property. If you use the funds for a business or other investments, you may be able to claim the interest expenses on Schedule 4 as investment expenses, but not rental expenses.
If the funds are for personal use, you cannot deduct the interest expenses.
You cannot deduct the repayments of principal on your mortgage or loan on your rental property.
Office expenses
You can deduct the cost of office expenses as rental expenses. These include small items such as pens, pencils, paper clips, stationery, and stamps.
Legal, accounting, and other professional fees
You can deduct fees for legal services to prepare leases or collect overdue rents as rental expenses.
You can also deduct amounts paid for bookkeeping services, audits of your records, and preparing financial statements. You may be able to deduct fees and expenses for advice and help to prepare your income tax return and any related information returns.
Management and administration fees
You can deduct the amounts paid to a person or a company to manage your property as rental expenses.
Maintenance and repairs
If you pay for repairs to your property, you can deduct the cost of labour and materials. However, you cannot deduct the value of your own labour.
Salaries, wages, and benefits
You can deduct amounts paid or payable to superintendents, maintenance personnel, and others you employ to take care of your rental property. You cannot deduct the value of your own services.
Property taxes
You can deduct property taxes of your rental property for the period when it was available for rent.
Utilities
You can deduct expenses for utilities, such as gas, oil, electricity, water, and cable, if your rental arrangement specifies that you pay for the utilities.
Travel and Motor vehicle expenses as rental expenses
There are two situations:
1. If you own one rental property, you can deduct reasonable travel motor vehicle expenses if you meet all 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; and
- 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.
2. 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; and
- generally manage the properties
Other rental expenses include:
- Landscaping costs
- Condominium fees
- And other reasonable rental expenses
Personal portion of your rental expenses
If you rent part of the building where you live, you can claim the rental expenses that relate to the rented part of the building. You have to divide the total expenses of the building between your personal part and the rented part. You can split the total expenses using square meters or the number of rooms you are renting in the building, as long as the split is reasonable.
All these rental expenses listed above are current expenses. According to CRA, current or operating expenses are recurring expenses that provide a short-term benefit. You can deduct 100% current expenses from your gross rental income in the year you incur them.
There is another type of expense – capital expenses, which we will discuss in next article:What you can claim as rental expenses – capital expenses.