Personal Portion (rental properties)

The Canada Revenue Agency says...

Rental Income Guide (T4036)

If you rent part of the building where you live, you can claim the amount of your expenses that relate to the rented part of the building. You have to divide the expenses that relate to the whole property between your personal part and the rented part. You can split the expenses using square metres or the number of rooms you are renting in the building, as long as the split is reasonable.

For example, if you rent 4 rooms of your 10-room house, you can deduct:


If you rent rooms in your home to a lodger or roommate, you can claim expenses for the part you are renting. You can also claim an amount for the rooms in your home that you are not renting that both you and your lodger or roommate use. Factors such as availability for use, or the number of persons sharing the room, can be used to calculate the allowable expenses. You can also calculate these amounts by estimating the percentage of time the lodger or roommate spends in these rooms (for example, the kitchen and living room).

Enter your expenses from the property on Form T776. In the first column, Total expense, enter the full amount of each expense. In the second column, Personal portion, enter the part of each expense that was for personal use. Enter the totals of each column on the appropriate lines to calculate your deductible expenses. Then subtract them from your gross rental income (line 8299). If you are a co-owner or partner of a partnership, you have to show the personal portion of the expenses for all co-owners or partners.

You cannot claim the expenses for renting part of your property if you have no reasonable expectation of making a profit.

For more information on renting part of your personal residence, see Changing part of your principal residence to a rental property.

Example

Example

Rick rents out 3 rooms of his 12-room house. He is not sure how to split the expenses when he reports his rental income. Rick's expenses were property taxes, electricity, insurance, and the cost of advertising for tenants in the local newspaper.

Rick can claim the part of his expenses that relates to the part of the property he rented in the current tax year. Since Rick rented 25% of his residence (3 out of 12 rooms), he can deduct 25% of his property taxes, electricity, and insurance costs from his rental income. He can deduct the full amount of the advertising expense, since this expense relates only to the rented part.

When he completes Form T776, Rick enters the full amount of each expense in the "Total expense" column. Then, in the "Personal portion" column, he shows the part of each expense that relates to his personal use. In this case, he enters 75% of the property taxes, electricity, and insurance costs for the property. He will not enter anything for advertising in the "Personal portion" column. Rick can also claim capital cost allowance (CCA) on the rented part of the property if it does not create or increase a rental loss and he is not designating the building as his principal residence.