Tax on net rental income.
Tax owed
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Net taxable rental income
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Your breakdown
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Net rental profit is ordinary income
Canada does not give rental income a special rate. Whatever is left after you deduct allowable expenses from gross rent gets added to your other income and taxed at your marginal rate, reported on form T776 with your personal return. This calculator takes your annual rent, subtracts mortgage interest and your other operating costs, and applies the marginal rate you enter to the profit. The headline result is the tax owed on that net figure, not on the rent itself.
Canada lets you deduct the interest in full
This is the single biggest difference from the United Kingdom, where the Section 24 rules replaced full interest deductibility with a restricted 20 percent credit for individual landlords. In Canada the mortgage interest on a property held to earn rental income is fully deductible against that income. The principal portion of your mortgage payment is not deductible, because repaying borrowed capital is not an expense, only the interest is. The tool asks for interest specifically for that reason. Alongside interest you can deduct property tax, insurance, utilities you pay, condo fees, advertising, property management, and current repairs that maintain the property rather than improve it.
A single rental, one tax year
Take a property collecting $30,000 of rent in the year, with $15,000 of mortgage interest and $6,000 of other costs covering property tax, insurance, and repairs. The owner sits in a 43 percent combined marginal bracket.
The owner keeps $5,130 of the $9,000 profit after tax. Notice that interest alone consumed half the gross rent, which is typical for a recently financed property and explains why a cash flowing rental can still report modest taxable income.
Current expense or capital cost?
The line between a repair and an improvement decides whether you deduct the cost now or add it to the building’s capital cost. Repainting, fixing a leak, or replacing a broken appliance with a similar one are current expenses, fully deductible this year. Replacing the roof, adding a deck, or renovating to a better standard than before are capital outlays that are not deductible immediately. The CRA scrutinizes this split, and miscoding a $20,000 renovation as a repair is a classic audit trigger. When in doubt, ask whether the work restored the property or genuinely bettered it.
Who this serves and a co ownership tip
This is for individual landlords estimating the annual tax cost of holding a rental, and for prospective buyers stress testing whether a property pencils out after tax. A practical lever many couples miss: rental income is generally split for tax purposes in proportion to who actually contributed the capital to buy the property, not simply 50 50 by default. If one spouse funded the down payment from their own savings, attributing all the income to the lower earning spouse can fail under the CRA attribution rules. Document who paid for what at purchase, because that ownership split locks in how the income and any eventual gain are reported.
Can I deduct a rental loss against my employment income?
Yes, if the rental is a genuine commercial venture with a reasonable expectation of profit. When deductible expenses exceed rent, the resulting net rental loss can offset your salary and other income on the same return, which can produce a refund. The CRA will challenge losses that look like a personal use property dressed up as a rental, such as a cottage rented occasionally to family below market rent, so the arrangement must be arm’s length and profit oriented.
Do I report rent on a gross or net basis?
You report gross rent as income and then claim your expenses separately on form T776, so the CRA sees both sides. You do not simply report the net figure. This matters because the agency matches the gross rent against information it may receive, and because expense categories like interest, property tax, and capital cost allowance each have their own treatment. Keeping receipts organized by category through the year makes the T776 straightforward at tax time.