Keeping a rental property in the condition you got it in costs money, and most of that cost comes off your rental income in the year you spend it. On Form T776, it goes on line 8960, Repairs and maintenance.
Some work is different. If it makes the property better than it was, the cost usually isn't a repair at all — it's a capital expense, and it's handled another way. That's the question this page spends the most time on, because it's the one that comes up most.
What belongs here
Labour and materials for minor repairs and maintenance on property you use to earn rental income. In practice, that's most of the paper a landlord collects:
- a plumber's or an electrician's invoice for a service call
- a furnace or appliance repair
- parts and labour on a fix you had done
- routine upkeep that keeps things working as they were
What does not belong here
The value of your own labour. Your time isn't deductible, however much of it a weekend took. Materials you bought still are — keep the hardware store receipt.
Repairs that are capital in nature. These aren't lost; they're claimed a different way, through capital cost allowance (CCA), which spreads the cost of a lasting asset over the years you own it rather than deducting it all at once. That's a different part of the form.
Work on used property you bought to make it fit to rent. If you bought a place that needed work before anyone could live in it, the CRA treats that work as a capital expense, even though the same job on a property you'd owned for years would be an ordinary repair.
Work done to sell. Repairs made in anticipation of selling, or as a condition of the sale, are capital expenses too.
Is it a repair or an improvement?
Renovations and expenses that extend the property's useful life or improve it beyond its original condition are usually capital. An increase in market value isn't the deciding factor. The CRA asks these questions instead:
Does it give a lasting benefit? A capital expense generally gives a long-lasting benefit — putting vinyl siding on a wooden house. A current expense usually recurs after a short period — painting that same house.
Does it maintain the property, or improve it? Restoring the property to its original condition is usually current: repairing wooden steps. Improving it beyond that is probably capital: replacing wooden steps with concrete ones.
Is it a part of the property, or a separate asset? Replacing one part of something is usually current — rewiring, because electrical wiring is part of the building. Buying a separate asset is capital — a refrigerator for the unit.
Was the property used when you bought it, and did the work make it fit to use? Then it's capital. Ordinary maintenance on a property you already had is usually current.
Was the work done to sell? Repairs made in anticipation of a sale, or as a condition of one, are capital. If the work would have been done anyway and a sale happened to be negotiated during or after it, it stays current.
Dossier flags a purchase that sounds large and durable so the question is in front of you when you file. It doesn't answer it — and if nothing about the invoice suggests an improvement, nothing gets flagged.
What to keep
Keep detailed records of the rental income you earn and the expenses you incur, supported by invoices, receipts, contracts, and other supporting documents. For repair work, the invoice is worth more than the payment record: a work order that describes the job is what answers the repair-or-improvement question later.
Don't send them in with your return — keep them in case the Canada Revenue Agency (CRA) asks to see them. The CRA may not allow an expense you can't support with a document. Generally, keep your records for six years from the end of the tax year they relate to.
If you rent out part of the place you live in, Form T776 has a personal portion column: you enter the full expense, then the part that relates to your own use. That split is arithmetic over your whole year rather than anything printed on a receipt, so it's worked out when you file.
Official CRA sources
- Guide T4036, Rental Income — Chapter 3: Expenses
- Rental expenses you can deduct
- Current expenses or capital expenses
Source: Canada Revenue Agency (canada.ca). Not tax advice.