Quick answer. Form T776 (Statement of Real Estate Rentals) reports gross rental income and deductible expenses to CRA. Deductible expenses (per T4036 Rental Income guide and current CRA guidance) include: mortgage interest (line 8710), property tax (line 9180), insurance (line 8690), utilities (line 9220), maintenance and repairs (line 8960), professional fees (line 8860), management and administration fees (line 8871), advertising (line 8521), office expenses (line 8810), and Capital Cost Allowance (CCA) via Area A. NOT deductible: mortgage principal repayments, purchase price of the property, land improvements that add lasting value (capital cost only), and personal-use portions of mixed-use properties. Key 2024+ rule change relevant to 2026 filings: CRA can deny expenses and CCA claims for unlicensed/unregistered short-term rentals; if you operate a Calgary Airbnb without the required Business Licence, your expenses become non-deductible. Loan fees are deducted over 5 years at 20% per year. Legal fees to purchase the property are NOT deductible — they are added to the cost base. The T776 net income flows to line 12599 of the T1 return. Sources: CRA T4036 Rental Income guide, T776 form instructions, canada.ca guidance updated May 2026.
The Deductible Expenses (Line-by-Line)
Line 8521: Advertising
Canadian newspaper, TV, radio advertising, online listing fees (RentFaster, Kijiji, MLS if applicable), professional photography for listings, and tenant finder's fees. All deductible in the year incurred.
Line 8690: Insurance
Landlord insurance policy premiums for the current year. If you paid a multi-year premium upfront, prorate across the covered years. Insurance covering the personal-use portion of a mixed-use property is not deductible.
Line 8710: Interest and Bank Charges
Mortgage interest is the largest deductible for most rental owners. Also included: interest on money borrowed to improve the property, interest charges paid to tenants on rental deposits, and bank service charges on the rental account. Loan fees (application, appraisal, processing, insurance, brokerage, finder's, and legal fees related to financing) are deducted over 5 years at 20% per year — NOT in the year paid. If the loan is repaid early, remaining fees can be deducted in the year of repayment. Refinancing for business/investment purposes: interest on the refinanced portion remains deductible. Refinancing for personal use: interest on the personal-use portion is NOT deductible.
Line 8810: Office Expenses
Small consumable office supplies: pens, paper, stamps, envelopes. Does NOT include capital items like calculators, filing cabinets, or desks — those are capitalized and depreciated via CCA if used for rental.
Line 8860: Professional Fees
Legal fees to prepare leases or collect overdue rents; accountant fees; bookkeeping; audit fees; financial statement preparation; tax advice specific to the rental. Critical exclusion: legal fees to PURCHASE the property are NOT deductible — those are split between land and building and added to the respective cost bases.
Line 8871: Management and Administration Fees
Property management fees paid to a RECA-licensed property manager (like UrbanLease under PREP Realty). Also: fees paid to agents for finding tenants or collecting rents. Fully deductible in the year paid.
Line 8960: Repairs and Maintenance
Ordinary maintenance and repairs that keep the property in usable condition: painting, plumbing repairs, appliance repair, roof patching, minor drywall, gutter cleaning, HVAC servicing. The distinction between repair (deductible) and improvement (capital, depreciated via CCA) is often audit-sensitive. Rule of thumb: replacing an existing item with a comparable one is repair; upgrading to a materially better item or extending useful life is improvement.
Line 9180: Property Taxes
Municipal property taxes and any school or education levy on the property. For 2026 Calgary rentals, average property tax runs approximately 0.65% of assessed value annually. Personal-use portion (if any) is not deductible.
Line 9220: Utilities
Heat, hydro, water, gas, sewer, and other utilities that the landlord pays (either because they are not separately metered or because the lease includes them). If the tenant pays utilities directly, no deduction to the landlord.
Line 9270: Other Rental Expenses
Catch-all for reasonable expenses that do not fit other lines: condo fees on a rental condo, cleaning between tenants, snow removal, lawn care, security monitoring, appliance rental. Document each carefully.
Area A: Capital Cost Allowance (CCA)
Depreciation on the building (Class 1: 4% declining balance for buildings acquired after 1987) and on capital assets like appliances (Class 8: 20%). CCA cannot create or increase a rental loss. Land is never depreciable. See our separate CCA guide for the strategy considerations before claiming.
What Is NOT Deductible
- Mortgage principal repayments. Only interest is deductible.
- Purchase price of the property (capital cost, depreciated via CCA on the building portion only).
- Land improvements that add lasting value: paving a driveway, building a fence, landscaping that becomes part of the property structure. Capital, may be added to cost base or Class 8/17 CCA where eligible.
- Legal fees to purchase the property (split between land and building, added to cost base).
- Personal-use portion of expenses on mixed-use properties (line 9949 splits out personal portion).
- Personal travel, personal vehicle costs unrelated to the rental.
- Capital expenditures that create long-lasting value (roof replacement, new furnace, new windows) — these are typically capitalized and depreciated via CCA rather than expensed in year paid.
The Critical 2024+ Change: Non-Compliant Short-Term Rentals
Since 2024, CRA can deny both expenses AND CCA claims on rental income from non-compliant short-term rentals. Non-compliant means: operating without the required municipal business licence, operating in a jurisdiction where the specific STR use is prohibited (e.g., some GTA cities), or otherwise failing to meet local regulatory requirements. For Calgary, this means an Airbnb or short-term rental operator without a City of Calgary Short-Term Rental Business Licence loses ALL expense deductions from 2024 forward. The tax on gross revenue (rather than net) can easily exceed the licence fee by an order of magnitude, making unlicensed STR operation a losing strategy after tax. Verify your Calgary STR licence status before filing any 2024 or later T776 for STR income.
Cash Method vs Accrual Method
Small individual landlords typically use the CASH method: report income when received, expenses when paid. Accrual method: report income when earned, expenses when incurred. For most individual Calgary rental owners with a single property or a small portfolio, cash method is simpler and CRA-accepted. Prepaid expenses under cash method: you cannot deduct prepaid expenses relating to a tax year 2+ years after payment (e.g., $2,100 paid for 3 years of insurance produces a $700/year deduction, not a $2,100 upfront deduction).
Personal-Use Portion Split
If part of the property is personal-use (owner-occupied plus rental portion, or a secondary suite rental in your principal residence), expenses must be split. Common split: by square footage percentage of the rental area relative to total. Alternative: by number of rooms if the split is clean. Document the calculation and be consistent year-over-year. Personal portion is reported on line 9949 and is not deductible against rental income.
Record Keeping for Audit Defence
- Keep every rental-related receipt, invoice, and bank statement for 6 years from the tax year (CRA record retention period). Some advisors recommend 7 years to align with Alberta civil limitation periods.
- Maintain a separate bank account for rental income and expenses. This single practice eliminates the majority of audit friction.
- Categorize expenses by T776 line as you incur them (in a spreadsheet or property management software) so filing is a compilation, not a reconstruction.
- Keep the property purchase closing documents (statement of adjustments, land title transfer, legal invoices) permanently — they establish the cost base for CCA and eventual capital gains calculation.
- Retain move-in/move-out condition reports and photographs — these support deposit-related tax positions and dispute defence.
Frequently Asked Questions
Do I have to file T776 if my rental produced a loss?
Yes. Any rental activity (profit or loss) must be reported. The loss (excluding CCA which cannot create losses) flows to line 12599 as a negative and offsets your other income.
Can I deduct expenses for a rental property that was vacant?
Yes, provided you were actively trying to rent it. Marketing, insurance, property taxes, and mortgage interest during a genuine vacancy period are deductible. A property held vacant with no rental intent is a different tax position and expenses may not be deductible.
How do I split expenses between a rented basement suite and the upstairs I live in?
Calculate the ratio of the rental area to the total area (typically by square footage). Apply that ratio to shared expenses (heating, water, property tax, insurance). Direct expenses that only serve the rental (e.g., a separate cable line for the tenant) are 100% deductible. Direct personal expenses (your own utilities during your area's use) are 100% non-deductible.
Do I need to file GST/HST on rental income?
Long-term residential rental (one month or more continuous occupancy) is EXEMPT from GST/HST regardless of income level. Short-term rental income above $30,000/year threshold triggers GST/HST registration. See our GST/HST rental guide for the specifics.
Does UrbanLease provide tax records to owners?
Yes. UrbanLease's owner portal provides monthly and annual statements structured to align with the T776 lines: rent received, itemized expenses by category, and totals ready for the T776 preparation. Property management services provided by PREP Realty.
Bottom Line
The T776 is straightforward once you understand which expenses go where and which are prohibited. The disciplines that separate a clean filing from an audit-vulnerable one: a separate rental bank account, receipts filed as you incur them, careful application of the repair-versus-improvement distinction, understanding that legal fees to buy are capital not expense, and awareness of the 2024+ non-compliant STR rule. UrbanLease's owner reporting is structured to make T776 preparation a compilation task rather than a reconstruction task.
Reviewed 2026-08-02. General information only, not tax advice. Consult a qualified Canadian tax professional (ideally an accountant familiar with Alberta rental property) before filing any T776 or making tax positions on the specific facts of your rental. CRA rules change; verify current rules on canada.ca.