Rental property owners in Quebec can deduct various expenses from their rental income to reduce their tax liability. To better understand the eligible rental expenses, here is a detailed guide on rental income and taxes in Quebec.
What is rental income?
Rental income is the gross income received from renting a property, whether it is a house, apartment, or commercial space. This income must be reported in the annual tax return.
Main deductible expenses for rental properties or housing
| 1 |
Mortgage interest |
The interest paid on a mortgage loan for the purchase or improvement of the rental property is deductible. |
| 2 |
Municipal and school taxes |
Property taxes paid to the municipality and school taxes are fully deductible. |
| 3 |
Insurance |
Insurance premiums for rental property protection (fire, theft, liability, etc.) are deductible. |
| 4 |
Management and administration fees |
● Property management fees: If you hire a company to manage your property, the fees paid are deductible.
● Legal and accounting fees: Fees paid for legal and accounting services related to the rental property are also deductible. |
| 5 |
Maintenance and repairs |
Costs incurred to maintain the property in good condition, such as plumbing, roof, or appliance repairs, are deductible. Note that major improvements must be amortized rather than fully deducted. |
| 6 |
Utilities |
If you pay for utilities (electricity, heating, water) provided to tenants, these costs are deductible. |
| 7 |
Advertising |
Expenses incurred to advertise the rental of the property, such as online or newspaper ads, are deductible. |
| 8 |
Travel expenses |
If you need to travel to manage the rental property, travel expenses (mileage, fuel, etc.) may be deductible, provided they are reasonable and well-documented. |
| 9 |
Condo fees |
For condos, condo fees (maintenance, management, etc.) are deductible. |
| 10 |
Depreciation deductions |
You can claim depreciation (CCA) to offset the property’s depreciation over time. CCA is calculated based on rules from the Canada Revenue Agency (CRA) and Revenu Québec and is applied to a percentage of the property’s value each year. |
Calculating deductions for partially rented properties
If you occupy part of the property and rent out another part, you can only deduct expenses related to the rented portion. Shared expenses must be allocated proportionally based on the area used for rental purposes.
It is crucial to keep detailed and accurate records of all deductible expenses related to your rental income, including invoices, receipts, contracts, and bank statements. These documents may be required in case of an audit by Revenu Québec or the CRA.
Where to report your rental income on your tax return?
When you file your tax return, rental income and expenses must be reported in the following forms:
- Federal: Use the T776 form for rental expenses, “Statement of Real Estate Rentals.”
- Provincial: Use the TP-128 form, “Income and Expenses for Rental Property.”
Professional support to optimize your rental income tax return
Understanding how to optimize deductions for rental income in your taxes can significantly reduce your tax burden. To optimize your tax situation and ensure compliance with tax regulations, we recommend consulting a tax accountant or tax advisor.
