Income Properties

By Evelyn Jacks, RWM, MFA, MFA-P, FDFS on April 14, 2025
Estimated reading time: 9 minutes

By Evelyn Jacks, RWM, MFA, MFA-P, FDFS on April 14, 2025
Estimated reading time: 9 minutes

Whether you have renters in your home or another property, know that the money you make can affect your income tax return. Here’s how to stay on the right side of the CRA.

Canadians love their real estate and they love renting their properties to make some extra money. However, that comes with some tax audit risk and the need to stay in the know of current tax law. Here’s what you should be thinking about for your 2024 and 2025 income taxes, as well as the forms you may need.

When you earn income from the rental of a home, apartment, condo or other property, you will report both gross and net income on the T1 tax return using Form T776 (Statement of Real Estate Rentals). But, sometimes the T2125 (Statement of Business Income and Expenses) can be used if you are considered to be “in business” as opposed to owning an asset from which you derive “income from property.”

Which one should you claim? It’s a fine line.

In general, though, the more services provided (board and lodging, security and cleaning services, and so on), the more likely it is that you’re in “business.” Alternatively, if you provide only basic services like heat, light, parking and laundry facilities, you’re reporting rental income rather than business income.

Principal residence is the place you live—what you call home. There are important rules to follow when you rent out a part of your principal residence. If there’s no expectation of profit—say you rent to your child who turns 18 and starts to contribute to room and board—then there’s no need to report the income, as any losses are not going to be deductible.

However, where there’s a potential for profit, tax reporting is required, because you’re charging fair market prices for the rental. This may happen if you rent out a basement suite to a university student for example. I cover other tax traps for principal residence renters below.

Business owners can choose a non-calendar fiscal period to report their business income. Rental property owners must report their net rental income on a calendar year basis—January to December—each year. In the first year of rental, income and expenses are reported only for the rental period.

It’s important to know that net rental income (rental income minus rental expenses) does........

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