Rental income in Canada is taxed as ordinary income, but the rules around deductions, depreciation, and reporting are not always obvious. This guide walks through how a small Alberta landlord, one to four doors, should think about taxes in 2026.
How is rental income taxed in Canada?
Rental income is reported on CRA form T776 (Statement of Real Estate Rentals) and the net income (after deductions) is added to your other income on your T1. There is no preferential rate, rental income is taxed at your marginal rate, which for an Alberta landlord earning $80,000 of other income falls around 30.5% federally and provincially combined.
What can you deduct?
Anything reasonable, current-year, and incurred to earn rental income. The big ones: mortgage interest (not principal), property tax, condo/strata fees, insurance, utilities you pay, repairs and maintenance, advertising, property management fees, legal and accounting fees, travel to the property (mileage at the CRA rate), and home-office costs if you actively manage from home.
Current expense vs. capital expense
A current expense maintains the existing condition (e.g. fixing a broken window with a similar window). A capital expense improves or replaces a major component (e.g. new roof, new furnace, new windows throughout). Current expenses are 100% deductible the year they happen. Capital expenses are added to the cost base and depreciated over multiple years via Capital Cost Allowance (CCA).
Capital Cost Allowance (CCA): the optional deduction
Buildings used for rental are typically Class 1 (4% declining balance) or Class 3 (5%). Claiming CCA reduces your current taxable income but creates two issues on sale: (1) recaptured CCA is fully taxable, and (2) you lose the principal-residence exemption for that property entirely (rentals don't qualify anyway, but CCA can affect a duplex where you live in one side). Many advisors recommend skipping CCA on appreciating properties.
Do I need to charge GST on rent?
No. Long-term residential rent (28+ days) is exempt from GST/HST. Short-term rentals (under 28 days, e.g. Airbnb) are subject to GST once you cross the $30,000 small-supplier threshold across all your taxable activities combined.
Co-owned properties
If you own a rental jointly with a spouse or partner, you split income and expenses according to your ownership share, not your marginal tax rate. The CRA looks at actual contribution to the property. Splitting unequally is possible if ownership is unequal, but the paper trail must support it.
Non-resident landlords
If you live outside Canada and rent out a Canadian property, the CRA requires 25% withholding on gross rent (NR4 process) unless you file form NR6 and elect to be taxed on net income. Most non-resident landlords are best served by a Canadian property manager who handles withholding and remittance automatically.
Record-keeping
Keep every receipt, invoice, and bank statement for at least 6 years. Digital is fine. If the CRA reviews your return, a roughly 1-in-20 event over a 6-year period for rental landlords, clean records turn a stressful month into a 30-minute exchange.