Rental Related Expenses on T776 or T2125?

by Erik
(Toronto)

Where To Report Rental Related Expenses

Where To Report Rental Related Expenses

I have a rental property in the US and Canada. I am not incorporated.

I drive around to look at possible purchases, where do I expense those trips?

In my T776 or in a T2125?

All of the income from the properties is in the T776 so the T2125 would be shown as a loss.


PS Great site. I learned that I couldn't expense my home office without prorating hours :(



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Erik, great question .. and it is a gray area.

As you have figured out, there is an important distinction between rental income and business income. See what taxtips.ca has to say on this matter:

http://www.taxtips.ca/realestate/rentalorbusiness.htm

It's hard to find definitive guidance on this issue. There was a bit of a discussion on this in these forums:

http://www.asktaxguru.com/712-travel-expenses-for-real-property-purchase.html

https://www.askmehelpdesk.com/advice/t-615431.html

They are U.S. sites but I believe these arguments could apply in Canada as well.

Sorry I can't be more help. Maybe some of my other site visitors with rental property experience will know the answer to your question.

Best bet is to visit your accountant for advice.

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May 18, 2015
 I looked into this further
by: Anonymous

Thanks for the help. You have a great site.

I ended up looking into this and because it is a passive investment there is no way to expense things like this. Anything that isn't directly related to the house doesnt count.

If I were incorporated it would be the same story since it would be a passive investment. To become an active investment I would have to provide many services on the side like cleaning etc and it is grey as to when you have enough services to be considered active even according to the CRA.

Also due to this passive investment I would not qualify for a reduced income tax bracket on the corporation.
May 22, 2015
 T776 or T2125
by: Lake

Thanks so much for taking the time to post back here. Good to know.
Jun 20, 2016
 Rental Income
by: Lauren from Brampton

If Sally rents half of John's basement and John doesn't claim the rent but claims the other half as a side business for which he has a business number, does John still have to claim rental income or can he claim it as part of the business?

Sally will be claiming the rent since she is a single and working low income.
Jun 20, 2016
 Laureen
by: Lake

I moved your question here where I chat about the difference between business income and rental income. Please read the above chat and comments then follow the links provided ... it should provide you with the answer to your question.

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