Rental income tax returns in BC
Updated
A rental property is straightforward to report and easy to report wrongly. Two decisions do most of the damage: what counts as a repair, and whether to claim depreciation at all.
Quick answer: Rental income and expenses are reported on form T776 inside your T1. The two decisions that matter most are whether a cost is a current repair or a capital improvement, and whether to claim capital cost allowance — because claiming it now creates a recapture on sale later.
On this page
- What is included
- Repair or improvement: what rental income tax allows
- The CCA trap, and change in use
- What goes on the T776, and what to keep
- Records a rental return depends on
- Renting to family, and selling a rental
- Who this is for, and who it is not
- The forms and the dates
- Who this is for in the Fraser Valley
- Other personal tax work
- Common questions about rental returns
What is included
- The T776 rental statement per property, inside your T1.
- Current against capital decided on each cost, with the reasoning recorded.
- The CCA decision made deliberately, not by default.
- Co-ownership split correctly where the property is held with someone else.
- Interest deductibility checked, which turns on what the borrowed money was used for.
- Change-in-use consequences flagged before they happen rather than after.
Repair or improvement: what rental income tax allows
Restoring the property to its previous condition is generally a current expense, deductible now. Improving it, or acquiring it, is capital, written off over time. A broken window is the first; upgrading every window, usually the second.
Getting this wrong in either direction costs money. Treating capital as current invites a reassessment; treating current as capital defers a deduction you were entitled to take immediately.
The CCA trap, and change in use
Capital cost allowance on a rental building cuts tax now but is recaptured as ordinary income on sale. For an appreciating property, claiming it is often the wrong trade. Current against capital and selling a rental property cover both ends.
Moving into a rental, or renting out a home, is a deemed disposition at market value — tax owing with no cash received. Change in use rules covers the elections that defer it.
What goes on the T776, and what to keep
Rental income is reported on Form T776, Statement of Real Estate Rentals, inside your T1. One form is filed per owner, per property, and each co-owner reports only their share.
| Section | What we need from you |
|---|---|
| Property details | Address, number of units, your ownership percentage, and the names of any co-owners |
| Gross rents | Rent received for the year, by unit, and any other income from the property |
| Expenses | Mortgage interest (not principal), property tax, insurance, repairs, utilities you pay, management and advertising |
| Personal-use share | The part of the property you or your family use, which comes out of every expense |
| Capital cost allowance | The building’s cost, less land, and any additions or improvements with dates |
Two T776 choices matter years later. CCA is optional and cannot create or increase a rental loss; it lowers tax now but is recaptured on a sale above depreciated cost. A suite in your home raises the principal residence question: whether part of the gain stays taxable, and whether an election preserves the exemption.
A T1 with a rental schedule starts from the $125 base return; the T776 and any change-in-use election are quoted with it in writing before work begins. Tax is due April 30 with the rest of your return.
Records a rental return depends on
- The mortgage statement that splits interest from principal — only the interest is deductible.
- Invoices for work on the property, described well enough to show whether it was a repair (deductible now) or an improvement (added to the cost and claimed through CCA).
- The purchase documents, including the split between land and building, because only the building is depreciable.
- A co-ownership agreement or record, where more than one person owns the property, showing each owner’s share of income and expenses.
- Lease agreements and rent records by unit and month.
Keep them for six years from the end of the tax year they relate to — and the purchase and improvement records for as long as you own the property, because they set the gain when it is sold.
Renting to family, and selling a rental
Renting to a relative below market rent is usually treated as a cost-sharing arrangement rather than a business: the rent is not reported as income, but a rental loss cannot be claimed either. Charge market rent and it is a rental like any other.
On a sale, CCA claimed is recaptured as income to the extent the price exceeds depreciated cost, and the gain above original cost is a capital gain. Both come from purchase and improvement records, so keep them as long as you own the property.
Who this is for, and who it is not
A good fit: an owner of one or more rental properties, held alone or jointly, including someone who has just started renting out a property they used to live in.
Not a fit: a short-term rental run as a business with services attached, which is closer to business income than rental income and is reported differently. In either case we say so on the first call rather than quoting for work you do not need.
The forms and the dates
Rentals go on form T776, one per property, each co-owner reporting a share. Repairs are deducted yearly; improvements are added to cost and, if claimed, depreciated as class 1 CCA, with recapture on sale. Converting a residence to a rental, or back, is a deemed disposition unless a subsection 45(2) or 45(3) election is filed that year.
Who this is for in the Fraser Valley
Our rental returns are Abbotsford and Chilliwack basement suites, Langley and Surrey townhouses owned by couples, and the odd Mission or Maple Ridge acreage. The questions repeat: current or capital, whether to claim CCA, and what happens when a rental becomes a home or vice versa.
Other personal tax work
The rest of what this covers, and the page each one is on.
Common questions about rental returns
We own it jointly. Who reports it?+
Is the mortgage payment deductible?+
Should we claim CCA?+
We rent a room in our own home. Is that different?+
What it costs. A T1 with a rental schedule starts from the $125 base return; the T776 and any change-in-use election are quoted with it. Every published fee →
Starting fees
Every fee is fixed in writing before any work begins.
- Personal tax return (T1)from $125; self-employed or rental $275–$500This page
- Monthly bookkeeping, GST/PST filing includedfrom $325 a month
- Payroll, remittances, T4s and ROEsincluded in monthly bookkeeping
- Books, payroll and the year-end T2 together$500–$700 a month
- Corporate year-end and T2 returnfixed fee, quoted in writing
- Catch-up bookkeepingfrom $2,200 per year of records
- Controller or CFO supportcontroller from $1,650, CFO from $2,750 a month
- One-off advice call with a CPA$225 plus GST