Income Property Owners

Do you own rental property?

Rental income is income you earn from renting property that you own or have use of. You can own property by yourself or with someone else. Rental income includes income from renting a house, apartments, rooms, space in an office building, or other real or movable property.

To determine whether your rental income is from property or from business, consider the number and kinds of services you provide for your tenants.

In most cases, you are earning income from property if you rent space and provide basic services only. Basic services include heat, light, parking, and laundry facilities.

If you provide additional services to tenants, such as cleaning, security, and meals, you may be carrying on a business. The more services you provide, the greater the chance that your rental operation is a business.

Income from a rental property is reported along with any personal income on a T1 Income Tax Return. Let us help you to determine which statement you need to file – Statement of Real Estate Rentals or a Statement of Business or Professional Activities.

You can deduct any reasonable expenses you incur to earn rental income. The two basic types of expenses are current expenses and capital expenses.

Current expenses

A current expense is one that generally reoccurs after a short period. For example, the cost of painting the exterior of a wooden property is a current expense.

Capital expenses

A capital expense generally gives a lasting benefit or advantage. For example, the cost of putting vinyl siding on the exterior walls of a wooden property is a capital expense.

Renovations and expenses that extend the useful life of your property or improve it beyond its original condition are usually capital expenses. However, an increase in a property’s market value because of an expense is not a major factor in deciding whether the expense is capital or current.

Contact us to discuss your tax reporting options and let us help you to maximize your tax return.