Who this is for
Homeowners in Surrey and the Lower Mainland with a rented basement suite, a rented floor, or a room rented to a lodger. Our records guide explains what to keep; this one explains what goes wrong.
The seven mistakes
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Not reporting the rent. Cash rent is still rent. A relative paying rent is still rent, with different rules if it is below market. Unreported rent is one of the easiest things for the CRA to find, through tenancy records and benefit applications.
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Claiming 100% of shared costs. Property tax, insurance, mortgage interest and utilities are split by the suite’s share of the home, by area or rooms. Claiming all of it is the most common error in reviewed rental claims.
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No records. Rent by month, the lease, the bills, the split calculation. Without them a review ends with the claim reduced. Keep everything six years.
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Calling an improvement a repair. Fixing a leak is a repair, claimed now. A new kitchen in the suite is an improvement, a capital cost, not claimed all at once. Mixing them up overstates this year’s expenses.
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Ignoring the change in use. Converting part of your home to a rental is a change in use. A small, ancillary rental with no structural change and no depreciation claimed is generally treated as not changing the home’s status. A full separate suite built for rental is a different situation, and worth asking about before the first tenant.
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Claiming depreciation on your own home. It is optional. For a suite inside the home you live in, claiming it can reduce the tax-free treatment of your home when you sell. Most owners should not.
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Being surprised at sale. If the suite was a substantial, separate rental, part of the gain on sale can be taxable. Know that before you list, not after.
One thing many people do not realize
A small rental use of your home generally does not change its status as your principal residence. That holds when there is no structural change and no depreciation claimed. Claiming depreciation on the suite changes that. It saves a little tax each year and can cost a share of the tax-free gain when you sell. For most homeowners, not claiming it is the better choice.
What to prepare
- Rent received by month and the lease
- The bills for the whole house
- The suite’s floor area and the home’s
- Receipts for repairs, marked suite or whole house
- Any renovation invoices for the suite
When professional help may make sense
A suite with losses every year, a suite rented to family below market, a suite built with a renovation loan, or a planned sale. Each has a tax angle worth settling in advance.
How Rex Tax may be able to help
We prepare the rental statement with your return and keep the split reasonable. We advise against depreciation where it would hurt, and prepare the sale reporting when the time comes.
Official sources
- CRA guide T4036: Rental income
- CRA: Principal residence and other real estate
- CRA: Rental expenses you cannot deduct
This guide is general information, not advice about your situation. It reflects the rules for the 2025 and 2026 tax years. It has not yet been reviewed by a practitioner. The information was checked against the official sources listed above on the date shown. Rules change. Check the official sources above or ask us. How we prepare these guides.