Rental Property Losses
When a rental loss reduces tax on your salary, why CCA cannot create a loss, family tenants below market, reasonable expectation of profit, and carrying losses.
The short version
- A rental loss (expenses more than rent) is deductible against your other income, salary included. On a $90,000 Ontario salary, an $8,000 rental loss saves about $2,370 of tax.
- CCA (depreciation) can't create or increase a rental loss. You can only claim CCA down to zero rental income.
- Renting to family below market rent usually means no loss at all: CRA limits expenses to the rent you charge.
- Years of losses invite the question every landlord dreads: is there a reasonable expectation of profit, or is this a personal-use property with a lease?
- Losses you can't use this year become non-capital losses: back 3 years or forward 20.
Rental Property Losses
Most new landlords lose money for a while. Mortgage interest is highest in the first years, the furnace picks the first winter to retire, and the market rent you were promised turns out to be the market rent someone else got. The tax system lets you deduct that loss from your salary, which softens the blow. It also has a short list of rules to stop the loss from being bigger than it really is, and CRA checks rental losses more than almost anything else on a T1.
What a Rental Loss Can and Can't Include
| Can create a loss | Can't create or increase a loss |
|---|---|
| Mortgage interest (not principal) | Capital cost allowance (CCA) |
| Property tax, insurance, utilities you pay | Costs of the part you live in yourself |
| Repairs and maintenance, property management | Improvements, which are capital; see repairs vs capital |
| Advertising, legal and accounting for the rental | Interest and property tax on vacant land not earning income |
| Condo fees | Interest and soft costs during construction, which are added to the building's cost |
The full list is on rental expenses, and CCA rules on CCA on rentals. Everything goes on form T776; see filling out the T776.
Is your rental loss safe to claim?
Tell the assistant your rent, expenses, who the tenant is, how long you've had losses and your other income. It checks which expenses count, whether CCA belongs, and how much the loss saves you.
Example: $8,000 Loss, Ontario Salary $90,000
| Amount | |
|---|---|
| Rent received | $24,000 |
| Mortgage interest, property tax, insurance, condo fees, repairs | $32,000 |
| Rental loss on line 12600 | -$8,000 |
| CCA claimed | $0 (it can't add to a loss) |
| Tax saved on the salary | about $2,370 |
From our 2026 rules engine with basic credits. A smaller refund is usually how the loss shows up, because the employer already withheld tax on the full salary. Want it during the year instead? Form T1213 asks CRA to let your employer withhold less.
The Rules That Shrink or Kill a Loss
- Family tenants below market rent: if you rent to a relative for less than market because they're family, CRA allows expenses only up to the rent. No loss.
- No reasonable expectation of profit: a rental used partly by you, or losing money year after year with no realistic plan to profit, can have its losses denied. CRA looks at the history, the financing and whether the rent is realistic.
- Part of your own home: only the rented part's share of costs counts; see renting part of your home.
- Short-term rentals where the city doesn't allow them, or without a required licence, lose their expense deductions entirely; see Airbnb and short-term rentals.
- Vacant land and buildings under construction: interest and property tax are added to cost, not deducted; see vacant land.
Rental losses for years, and planning to sell?
The Rental Sale SmartFile works out the capital gain, recapture and what your past losses and CCA mean for the tax when you sell.
Using a Loss You Can't Use This Year
If the rental loss is bigger than all your other income, the unused part is a non-capital loss. Carry it back up to 3 years on form T1A, which gets you a refund of tax already paid, or forward up to 20 years. Co-owners split the loss by ownership share; a spouse with the higher income can't simply take all of it. More on rental income and selling later: rental sale calculator.
Rental Loss Questions
Can I deduct a rental loss from my employment income?
Yes. A rental loss from a property rented to earn income reduces your other income, including salary, on line 12600 of your return.
Can CCA create a rental loss?
No. Capital cost allowance can only reduce rental income to zero. It cannot create or increase a rental loss.
Can I claim a loss renting to my son or daughter?
Usually not if the rent is below market because they are family. CRA limits your expenses to the rent received, so there is no loss to claim.
How many years can I claim rental losses?
There is no fixed limit, but repeated losses can lead CRA to question whether there is a reasonable expectation of profit, especially if you or family use the property.
What happens to a rental loss I can’t use?
It becomes a non-capital loss that can be carried back 3 years or forward 20 years against other income.
Sources: CRA, Guide T4036, Rental Income; Income Tax Act, subsections 18(2) and 18(3.1), the short-term rental expense rules, and Regulation 1100(11) (CCA limit). Checked October 2026. The example uses our 2026 Ontario engine with basic credits. Whether a loss is allowed depends on the facts; the reasonable expectation of profit test is summarized only.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.