Rental income in Québec: how do you report it and what can you deduct?
Short answer: rental income goes on both returns: Form T776 on the federal return and Form TP-128-V (line 136) on the Québec return, one statement per property. You pay tax on the rent minus your expenses. Capital cost allowance (CCA) on the building is optional, can't create or increase a rental loss, and can cost you part of the principal residence exemption if you rent part of your own home.
Where it goes on each return
- Federal. Form T776, Statement of Real Estate Rentals. Gross rent goes on line 12599 and net rent on line 12600 of the T1.
- Québec. Form TP-128-V (or an equivalent statement) for each property, with the net amount on line 136 of the TP-1. A loss is entered as a negative amount.
- Co-owners. Each co-owner reports their share. Owning a duplex with your sister as an investment doesn't make you a partnership.
Expenses you can deduct
- Mortgage interest (not the principal) and bank charges
- Municipal and school taxes for the period the unit was available for rent
- Insurance for the current year
- Repairs and maintenance (materials and paid labour, not your own time)
- Utilities you pay, condo fees, advertising, management fees
- Professional fees: bookkeeping, tax preparation, legal fees for a lease
If you live in the building or rent part of your home, deduct only the share for the rented space, usually by floor area or number of rooms.
Québec only: if you pay contractors (not employees) to maintain, repair or renovate the rental building, attach Form TP-1086.R.23.12-V with the name of each person or business that did the work. Revenu Québec can apply a penalty if it's missing.
Repairs or improvements?
Restoring something to its original condition is usually a current expense you deduct this year: re-shingling the roof or repointing brick with the same materials. An improvement or a new item, such as adding vinyl siding or buying a new refrigerator, is a capital expense. It goes into CCA over several years instead.
CCA: helpful, with a catch
Most rental buildings are in class 1, at 4% a year on a declining balance. Land is never depreciable. Two cautions apply:
- No loss from CCA. On both returns, CCA can only bring net rental income down to zero.
- Your own home. If you rent part of your home (a basement apartment or a room), the CRA usually doesn't treat it as a change in use as long as the rental is small, you make no structural changes and you claim no CCA on it. Claim CCA and that part can lose its principal residence status, so a share of the gain becomes taxable when you sell.
CCA you claimed can also be added back to income when you sell the building for more than its depreciated value.
Your RL-31 obligation
Every Québec landlord must file an RL-31 slip for each dwelling rented on December 31 and give a copy to the tenant by the end of February. Tenants need it for the solidarity tax credit. More than five slips must be filed online.
An example
Nadia lives upstairs in her Laval duplex and rents the ground floor for $1,400 a month, so $16,800 a year. Both units are the same size, so she deducts 50% of the mortgage interest, property taxes and insurance, plus 100% of a $900 repair to the rented unit's kitchen. She reports the net on the T776 and the TP-128-V and issues one RL-31. Renting short term on Airbnb? Our Airbnb bookkeeping guide covers the extra rules.
Want us to handle it?
Book a free 30-minute session at soleraaccounting.ca/rendez-vous or call 450 612-7223. We prepare the T776 and TP-128 for each property and tell you whether claiming CCA makes sense in your case. Service in French, English and Arabic.
This article is general information, not personalized tax advice.
Frequently asked questions
Do I have to claim capital cost allowance on my rental?
No, CCA is optional. You can claim any amount up to the maximum, or none. It can’t create or increase a rental loss, and it may affect the principal residence exemption if you rent part of your home.
Do I need to file a Québec form separate from the T776?
Yes. Revenu Québec wants Form TP-128-V or an equivalent statement for each property, with net rental income on line 136 of the TP-1.
When do RL-31 slips have to go to tenants?
By the end of February following the year. The slip covers each dwelling rented on December 31, and the tenant uses it for the solidarity tax credit.
Sources
- CRA – Rental Income guide T4036
- CRA – Rental expenses you can deduct
- CRA – Rental expenses you cannot deduct
- CRA – Principal residence and other real estate
- Revenu Québec – Line 136, Rental income
- Revenu Québec – TP-128-V, Income and Expenses Respecting the Rental of Immovable Property
- Revenu Québec – Capital cost allowance (landlords)
- Revenu Québec – Landlords: file your RL-31 slips by February 28
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