Do you Rent a portion of your home?
Renting Part of your home
What do we do with that rental income and what expenses can we deduct.
Rental income is reported on the T776 – Statement of Real Estate Rentals.
Deduction may be claimed for home expenses when a portion of the home is being rented out. In other words, home expenses related to the rented portion are deductible. The easiest and most straight forward way to allocate expenses is to base it on the Square footage being rented out in comparison to the total square footage of the home.
What can be deducted as Rental Expense?
Any reasonable expenses incurred to earn rental income are deductible.
Common expenses deductible:
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· Mortgage and other interest · Property taxes · Insurance · Maintenance and repairs · Condo fees · Advertising and promotion |
· Professional fees · Utilities · Travel and vehicle expenses (restrictions apply) · Office expenses (restrictions apply) · CAA on capital purchases / assets |
Non-deductible expenses:
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· Mortgage principal · Land transfer tax · Penalties on tax assessments |
· Imputed value of labour · Personal value of expenses |
Selling your Home when Part Rented – Do we pay tax on capital gains?
The gain on sale of Principle residence rented out will not be taxed if the following conditions are met:
- The rented portion of the property is small in proportion to the whole property.
- Structural changes not made to the property to make is more suitable for renting.
- CCA was not deducted on the portion used as rental property
If the above conditions are not met:
- Capital gains reported only on the portion used as rental property
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