What rental expenses are deductible in Canada?
Allowable rental deductions include: mortgage interest (not principal), property taxes, insurance premiums, repairs and maintenance (not capital improvements), property management fees, advertising costs, professional fees (legal, accounting), utilities if paid by landlord, and Capital Cost Allowance (CCA/depreciation). Capital improvements must be added to the property's cost base and depreciated over time, not deducted immediately.
Can I deduct a rental loss against my employment income in Canada?
Yes. Unlike the US, Canada generally allows rental losses from income-producing properties to be deducted against employment or business income in the same year. This is a significant tax advantage. However, CRA may challenge rental losses if the property is rented at below-market rates, primarily used personally, or if there is no reasonable expectation of profit. The Supreme Court's Stewart decision confirmed that genuinely commercial rental activities can generate deductible losses.
What is Capital Cost Allowance (CCA) for rental properties?
CCA is Canada's equivalent of US depreciation. Rental buildings are typically Class 1 (4% declining balance) or Class 3 (5%) if built before 1988. CCA can only reduce net rental income to zero — it cannot create a rental loss. Claiming CCA triggers recapture when you sell the property (taxed as ordinary income), which is why many landlords choose not to claim it. Equipment and appliances (Class 8, 20%) may be depreciated to create losses.