In general, the number and kinds of service provided in
relation to the rental of the property will determine whether the income
is property or business income. The more services that are provided,
the more likely that the income will be considered business income.
The number of rental properties being managed will not affect the
classification of the income. For more detailed information,
see the Canada Revenue Agency (CRA) article
Rental income or business income?
Tax
Treatment Differences - Business vs Property Income
Property income and business income are treated
differently for tax purposes. The following are some of
the differences in taxation of individuals.
Business Rental Income
Tax Treatment
is reported on lines 13500 to 14300 (line 135 to 143 prior to 2019) of the tax
return, as part of self-employment income. The forms to be
completed can be found in the link below to guide T4002.
personal income tax return
filing due date for the individual (other
than a business whose expenditures are primarily in connection with a tax
shelter) and their spouse is June 15th, but taxes are still
payable by April 30th
Property Rental Income
Tax Treatment
from real estate rentals is reported on Form T776, and on line 12600
rental income (line 126
prior to 2019) of the tax
return.
is not subject to CPP premiums.
is not included in working income
for the Canada Workers Benefit (CWB).
is not included in self-employment
income for calculation of the refundable medical expense
supplement.
is not included in earned income
for purposes of calculating the child care expense deduction.
all rental income from property is reported on a calendar year
basis.
personal income tax return filing due date is April 30th.
To input rental income in the Canadian
Tax and RRSP Savings Calculator, include rental income from business
as self-employment income, and rental income from property as "other
income".
New: For a partnership
carrying on a rental business, it is likely that an Underused
Housing Tax return was required to be filed for 2022, with the first return due
date deferred to April 30, 2024. Depending on the partners, it is possible
that the UHT return may not have to be filed for 2023 and later years.
Rental Income Received by a Corporation
When rental income is received by a corporation, the
income is usually considered investment (property) income, and is not
considered active business for purposes of the small
business deduction. A
corporation whose principal purpose is to derive income from property is
usually considered a specified
investment business, and is not eligible for the small business
deduction.
Tax Tip: If you plan
to pursue property rental, know the tax rules, and get professional
advice!