The municipal tax bill on a rental property is a rental expense. On Form T776, it goes on line 9180, Property taxes.
What belongs here
Property taxes you incurred for your rental property for the period it was available for rent — on both the land and the building where the property sits.
The words doing the work are available for rent. It isn't about whether a tenant was actually in place every month; it's about the period the property was available.
What does not belong here
Land transfer tax. You cannot deduct the land transfer tax you paid when you bought the property. It's added to the cost of the property instead, where it matters when you sell. It's a one-time tax on the purchase, not a recurring tax on ownership — despite the similar name.
Property taxes during construction or renovation. Taxes that relate to a period when you were building, renovating, or altering the property may be a soft cost — a carrying cost added to the building rather than deducted in the year. If you were doing that kind of work, keep those bills identifiable.
One limit on vacant land
If your rental income comes from vacant land, property taxes and interest on that land are limited to the rental income left after your other expenses. They cannot create a rental loss or make an existing one bigger. What can't be deducted can generally be added to the cost of the land instead, which affects the capital gain or loss when you dispose of it.
And if the vacant land earns no income at all, you cannot deduct its property taxes or mortgage interest, and you cannot add them to the land's adjusted cost base either.
This limit is applied on the return, once the year's other expenses are known. Nothing on the tax bill will tell you it applies.
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 this line:
- the municipal property tax bill or assessment notice, which shows the period it covers and the property it's for
- proof of payment, or the mortgage statement if your lender pays the taxes out of an escrow account on your behalf
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 tax bill, then the part that relates to your own use. That split is worked out when you file.
Official CRA sources
Source: Canada Revenue Agency (canada.ca). Not tax advice.