What You Can Actually Deduct From Rental Income in Canada

Mortgage interest on a rental property is deductible against rental income — but the principal portion of your payment is not, since that's building equity, not an expense. Only the interest component, which you can find broken out in your amortization schedule, counts.

Common deductible operating expenses include: property tax, insurance, utilities (if you pay them as the landlord), condo or HOA fees, property management fees, advertising costs to find tenants, and legal or accounting fees directly related to the rental.

Repairs and maintenance that keep the property in its existing condition (fixing a leak, repainting, replacing a broken appliance) are generally deductible in the year incurred. Capital improvements that improve or extend the property's value or life (a new roof, a major renovation) generally need to be capitalized and depreciated over time instead of deducted all at once — this distinction is a common source of errors.

Capital Cost Allowance (CCA) lets you depreciate the building itself (not the land) over time, but claiming it has real trade-offs — it can reduce or eliminate the principal residence exemption's protection if the property is ever converted to your primary home, and it reduces your cost base, increasing the eventual capital gain on sale. Whether to claim CCA at all is a genuine judgment call worth making with an accountant, not a default 'yes.'

Keep organized, contemporaneous records — receipts, invoices, a simple income/expense log — since defending a deduction after the fact without documentation is far harder than tracking it as you go.