Who this is for
Homeowners in Surrey and nearby who rent out a basement suite, a floor, or a room. The same rules apply if you own a second house or condo and rent the whole thing, with fewer things to split.
One thing most people do not realize
Claiming depreciation on the rented part of the home you live in is optional, and for most owners it is a mistake. It saves a little tax each year and can cost a share of the tax-free treatment of your home when you sell. Keep the suite’s share of expenses; skip the depreciation unless you have thought it through.
The rent is income
Rent you receive goes on your return as rental income, on a form called the T776. That includes rent paid in cash. If a family member pays you below-market rent, tell us, because the rules are different when there is no real intention to make a profit.
Rent is normally rental income, not business income. It becomes business income only if you provide extra services like meals or cleaning, as a boarding house would.
Expenses you can claim
Costs that are only for the suite. Claim all of them. Advertising, a repair inside the suite, a separate meter, a lock change.
Costs shared with the rest of the house. Claim the rented share. Mortgage interest (not the principal), property tax, home insurance, utilities you pay, strata fees if any.
Split shared costs in a reasonable way, by floor area or by the number of rooms. If the suite is 40% of the home’s area, the rented share of property tax is 40%. Write down how you worked it out and use the same method each year.
Repairs and improvements are different
A repair puts something back the way it was. Fixing a leaking tap, repainting, replacing a broken appliance with a similar one. Those are claimed in the year.
An improvement makes something better or lasts for years. A new kitchen, a new roof, finishing the basement in the first place. Those are capital costs. They are not deducted all at once. Keep the invoices anyway. They matter if you ever sell.
Be careful with depreciation on your own home
The CRA lets you claim depreciation, called capital cost allowance, on the rented part of a building. It is optional. For a suite inside the home you live in, claiming it can affect the tax-free treatment of your home when you sell it. Most people are better off not claiming it on their own home. We go through this with you before anything is claimed.
Records to keep
- Rent received, by month, with the tenant’s name. A simple sheet is fine.
- The lease or rental agreement
- Mortgage statement showing the interest for the year
- Property tax notice and home insurance bill
- Utility bills for the whole house, if you pay them
- Receipts for repairs and purchases, marked suite or whole house
- The floor area of the suite and of the home, for the split
- Dates the suite was empty, if any
Keep all of it for six years after the year it relates to. Rental claims are one of the items the CRA reviews by letter.
What a loss means
If expenses are higher than rent, the loss can reduce your other income. The CRA expects there to be a real intention to make a profit over time. Years of losses on a suite rented to a relative for a low amount can be questioned.
How we can help
Bring the records above with your other tax documents. We prepare the rental statement with your return, work out the split, and tell you what to track so next year is quicker.
Official sources
- CRA guide T4036: Rental Income
- CRA: Completing Form T776, Statement of Real Estate Rentals
- 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.