CRA has summarised the Income Tax Act and Regulations pertaining to Real Estate Rental Income in their guide T4036. Basically, the guide introduces the form (T776) for reporting Income and Expenses from Rental Income. For Rental Income CRA prescribes accrual basis of reporting. You are to include rent in income for the year in which they are due, whether you receive them in that year. You can deduct expenses in the year you incur them, whether you pay them in that period or not. Your gross rental income is the total gross rents you earned during a year. You can deduct any reasonable expenses you incur to earn rental income. CRA make two big divisions of the expenses;
But, you can deduct a portion of it over a reasonable period of time. Purchase price of rental property, legal fees and other cost related with buying the property, and cost of furniture, fixture and equipment are treated as Capital Expenses. Renovation expenses are also treated as Capital Expenses. CRA use
The expenses which you can deduct from Rental Income are; Advertising, Insurance, Interest on mortgage, Bank charges, Management and administrative fees, Repair and maintenance, Salaries & wages paid to employees, Property taxes, Utilities, Motor vehicle expenses related to property, Landscaping, Condo fees, etc. For your interest we are providing a link to T4036. It contains most useful information for investors, real estate agents & brokers and those persons who are interested in investing in real estate.