Reporting rental income tax return
Report rental income on tax return if, during the year, you received rental income from a real property. For personal tax return, rental income and expenses must be reported on the CRA T776 rental income form. In this article, I will go through how to prepare and calculate rental income, what expenses you can claim, where to enter rental income on the tax return, and the tax consequences of rental income or rental loss in the case of an individual i.e., personal tax return. A professional CPA opinion may be required in case of a partnership, corporation and if you are claiming capital cost allowance on property and equipment.
Where to enter rental income on tax return
Income from rental property should be reported by completing the T776 form, also known as statement of real estate rentals. You can download the form directly from CRA website, complete the form and attach to your T1-Jacket. Most tax software has the form built in the tax software or your tax preparer professional will have the forms, if your taxes will be prepared by a professional CPA accountant. We have a comprehensive tax checklist to report property income on the tax return.
How to calculate rental income for tax return
In Part 1 of the tax return provide your name, SIN, fiscal period, and if this was the final year of your rental operation. In the next section provide details of other co-owners and partners. In the income section, you will report the gross rent received during the fiscal period. You will report rent received in the form of cash or cheques, kind (goods or commodities), and/or services. Report entire rents you earned in the year on line 8141.
If you have received rent in the form of services or in kind report the fair market value on line 8230.
Following the income section, under expenses you will report proportionate amount of expenses related to your rental area. If you claim more than that upon the event of a CRA audit you may be penalized if the CRA finds any irregularities based on the guidelines set forth by them.
What rental expenses can be reported on tax return
Some of the expenses that can be claimed are as follows
- General cleaning, repairs and maintenance
- Mortgage interest (not principal)
- Management, Strata fee
- Property taxes
- Water and Sewer taxes
- Specific travel and vehicle expenses (few rules need to follow)
- Garbage removal fees
Lastly, you will calculate net income or net rental loss from all properties, and it will be reported on the main T1 jacket.
When to submit income tax return.
From a personal perspective, generally you will report all property income on your taxes for the year you received. From Jan to Dec collected rent will be reported on or before April 30th of the following year.
Why should I report rental income on my tax return?
Not reporting the property income on your taxes could lead to unpleasant consequences. CRA expects Canadian residents to report honestly all of their worldwide income. CRA uses different audit method and resources to determine your income. They can also access your bank account and even can get information from tax agencies outside of Canada. CRA will impose fines and penalties on unreported income. If you are still unsure, get in touch with a professional CPA firm like CNC Accounting to find out and understand your tax obligations.
25% on amounts they receive as income on real property
Income tax guide for election under section 216 can be found on CRA website.
The NR4 Form is for Canadian tax purposes. It should be issued to any nonresident of Canada who has received income from a Canadian source