Deductable Expenses for Your Rental Properties

Because we are talking tax today, I have to make a disclaimer that I am not an accountant, lawyer or an advisor and this article is not intended as tax advice. Please check everything with your own accountant and legal team.

As a rental property owner, it is important to understand what expenses you can deduct in order to improve your profit margin as much as possible. It is prudent to speak with your accountant in order to ensure you have a good understanding of the tax-deductible items. Below is a non-comprehensive guide to some of the most common items, which are frequently deducted as a rental property owner.

An important thing to understand is the difference between improvements and repairs. Many owners often think that everything they fix on a property is tax-deductible. This is not always the case.

A repair is essentially anything done to keep the property in good, safe condition. Consequently these repairs are tax-deductible in the year in which the repair is done. Examples of repairs would include painting, replacing fixtures and landscaping as well as all labour costs.

An improvement is something that you do to the property in order to add value to it. As such, it is not usually tax-deductible at the time when you pay for them. That said, you may be able to recoup the cost of these capital improvements by depreciating the cost over the life expectancy of your property.

Common examples of capital improvements would include adding a garage, a new roof, new windows, replacing the wiring or the plumbing.
You will be able to deduct travel to and from your property. You can choose to deduct the exact amount or choose to use a standard mileage rate. Note: it is a common belief that CRA is trying to eliminate this deduction.

Lastly, the mortgage interest portion of your payment can be deducted on investment properties as well as appraisals, inspections, legal fees, accounting fees, insurance, condo/strata fees and Realtor commissions. Please check with your accountant to see what you can or cannot deduct.
In closing, make sure you keep good records and keep your receipts. This will make sure you have a paper trail for any deductible expense.

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