Renting a Room in Your House
Tax on renting a room, basement or garden suite: splitting expenses, keeping the principal residence exemption, CCA and HST.
The short version
- Rent out a room, a basement apartment or a garden suite and the rent is taxable income, reported on form T776. You deduct the rental share of the home's costs.
- Split shared costs (mortgage interest, property tax, insurance, utilities, repairs) by the share of floor space rented, or by rooms. Costs only for the rental part are 100% deductible.
- Your home stays fully a principal residence if the rental is small compared with the home, you make no structural changes, and you claim no depreciation (CCA).
- Build a separate unit, or claim CCA, and part of the home may become a rental property for tax: that part's future gain can be taxable.
- Long-term residential rent is exempt from GST/HST. Building a brand-new rental unit on your property can trigger HST self-supply rules.
Renting a Room in Your House
A basement apartment is the modern Canadian pension plan: it pays every month, it helps with the mortgage, and the tenant shovels if you're lucky. The tax side is simple if you keep it simple. The one decision that matters is whether you treat the rental as part of your home or as a separate rental property, because that choice can follow you all the way to the day you sell.
Example: Renting a Basement Room
| Ontario, room rented at $900 a month, 25% of the floor space | Amount |
|---|---|
| Rent received for the year | $10,800 |
| Home costs: mortgage interest $9,000, property tax $4,800, insurance $1,800, utilities $4,200 | $19,800 |
| Rental share (25%) | -$4,950 |
| Net rental income | $5,850 |
| Tax on it, with a $75,000 salary | about $1,735 |
From our 2026 rules engine, rounded. Repairs only to the rental part are fully deductible; whole-house repairs are shared. What's deductible and what isn't is on rental expenses and repairs vs capital; the form is on form T776.
Renting part of your home, or planning to?
Tell the assistant the rent, the share of the house, your costs and whether you'll renovate. It estimates the tax and tells you whether your home stays fully tax-free when you sell.
Keep the Principal Residence Exemption
CRA's position is that a home keeps its principal residence status when three things are true:
- The rental is ancillary: a room, or a small part of the home, not most of it.
- No structural changes were made to create the rental space.
- No CCA (depreciation) is claimed on the house.
Meet all three and the whole home stays exempt when you sell. Claim CCA to lower your rental tax and you trade a small saving now for a taxable gain on that part later, which is rarely a good trade on a home. More on the principal residence exemption and CCA.
Basement Units and Garden Suites
- A self-contained unit built with structural changes can be treated as a partial change in use: the rental part is considered sold and bought back at market value, with later growth on that part taxable. See change of use.
- Building a new unit to rent (a garden suite or a new basement apartment) can make you a builder for GST/HST purposes, owing HST on the unit's value when the first tenant moves in, with a rental rebate to offset part of it. See GST/HST new residential rental property rebate; Ontario rebates are explained at OntarioHSTRebates.ca.
- Building a separate suite? The full tax rules are on garden suites and ADUs.
- Planning a garden suite in Ontario? Zoning, permits and costs are covered at GardenSuiteOntario.com.
Selling a home with a rental unit?
The rental sale SmartFile works out the taxable part, any recaptured CCA and the principal residence share, and prints the T776 and Schedule 3 lines.
Other Rules Worth Knowing
- Renting to family below market isn't a business; you can't claim a rental loss.
- Short-term rentals follow different rules, including possible GST/HST and municipal limits; see Airbnb and short-term rental tax.
- Keep receipts and a simple floor-space calculation; CRA asks for both on review.
- The whole picture of rental tax is on rental property tax.
Renting Part of Your Home Questions
Do I pay tax on renting a room in my house?
Yes. The rent is income, reported on form T776, minus the rental share of your home costs such as mortgage interest, property tax, insurance and utilities.
Does renting a basement affect my principal residence exemption?
Not if the rental is a small part of the home, you made no structural changes, and you claim no CCA. A self-contained unit created with structural changes, or claiming CCA, can make part of the home a rental property for tax.
How do I split expenses when renting part of my home?
Usually by the share of floor space rented, or the number of rooms if they are similar in size. Costs only for the rental area are fully deductible.
Should I claim CCA on my house if I rent a basement?
Usually not. Claiming CCA can cost you part of the principal residence exemption and lead to recapture when you sell, which generally outweighs the yearly saving.
Do I charge HST on rent for a room or basement apartment?
No. Long-term residential rent is exempt from GST/HST. Building a new rental unit can trigger HST self-supply rules, with a rebate available.
Sources: CRA, Income Tax Folio S1-F3-C2, Principal Residence (paragraph 2.59); Guide T4036, Rental Income. Checked October 2026. Whether a basement unit or garden suite is a partial change in use, and whether HST self-supply applies, depends on the facts; get advice before building. The example is illustrative.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.