Becoming a landlord is an exciting step — especially when your rental property is also part of your wealth-building strategy. But many first-time landlords in Ontario aren’t fully prepared for the tax side of real estate investing.
As both a financial coach and licensed mortgage agent, I specialize in helping clients approach their investments holistically — blending clear financial guidance with practical planning, peace of mind, and long-term success.
If you’ve just purchased (or are about to purchase) your first rental property, this guide will help you understand how to handle the taxes — the smart, sustainable way.
🎯 First, Know What Counts as Rental Income
In Canada, any money you earn from renting out a property — whether it’s a basement suite, a fourplex, or a vacation rental — is considered rental income and must be reported to the CRA.
That includes:
- Monthly rent collected from tenants
- Payments for utilities (if paid by the tenant to you)
- Parking fees or laundry revenue
- Rent paid in advance or security deposits (if you keep any portion)
💡 Tip: Keep a simple log or spreadsheet of all rental-related payments and income — ideally updated monthly.
🧾 What Expenses Can You Deduct?
This is where things get exciting — and where many landlords miss out.
You can deduct reasonable expenses that relate directly to earning rental income. That includes:
✅ Mortgage interest (not the principal portion)
✅ Property taxes and insurance
✅ Repairs and maintenance
✅ Utilities (if paid by you)
✅ Condo fees
✅ Advertising for new tenants
✅ Accounting or property management fees
✅ Travel expenses for property visits (within reason)
If you're renting out part of your principal residence (like a basement apartment), you’ll need to divide shared expenses (such as heat or internet) based on the percentage of the home used for rental purposes.
🔧 Repairs vs. Capital Improvements: What’s the Difference?
Not all expenses are treated equally. The CRA distinguishes between:
- Current repairs: Minor, routine fixes like painting, broken light switches, or appliance replacements — usually deductible in full the same year.
- Capital improvements: Major upgrades that increase the value of the property (like adding a new bathroom or replacing a roof) — these must be deducted gradually over time as "capital cost allowance" (CCA).
💡 Tip: Always keep receipts and records, and label each upgrade as a repair or capital improvement from the start.
📉 Can You Claim Depreciation (CCA)?
Yes — but with caution.
CCA allows you to deduct a portion of the building’s value each year to account for wear and tear. However, if you sell the property in the future, you may face a recapture of that depreciation, meaning you’ll have to pay some of it back as taxable income.
For this reason, I usually recommend:
- First-time landlords don’t claim CCA until they’ve spoken with a financial coach or accountant
- Focus on maximizing current expenses and using CCA only if you have rental losses to offset
📁 Organize for Tax Time All Year Long
Avoid the panic of tax season by creating a simple system from day one:
- One folder for receipts (digital or paper)
- One spreadsheet or app for income and expenses
- A calendar reminder each month to log rent received and any new costs
- Keep a backup of your lease agreements, mortgage statements, and any professional reports
If you co-own the property with a spouse, split the income and expenses based on ownership share.
💡 Bonus Tips for Ontario Landlords
- Report your rental income even if you didn’t make a profit — the CRA still requires it.
- Short-term rentals (like Airbnb) may be taxed differently than long-term leases — get advice if this applies to you.
- Newcomers: If this is your first time dealing with Canadian property taxes, don’t worry — I guide many clients through the process in both English and Spanish.
- First-year landlords often benefit from a one-time tax review or planning session to make sure nothing gets missed — this can save you hundreds later.
Ready to Manage Your Rental Property Like a Pro?
Whether you own one unit or ten, the way you manage your tax strategy affects your bottom line — and your peace of mind.
👉 Book a free discovery call and let’s build a simple, smart plan for your rental property — one that supports your goals, minimizes your taxes, and sets you up for success year after year.
Holistic. Bilingual. Toronto-based.
You don’t have to do it alone — I’m here to guide you.