Updated on January 5, 2024
Understanding CRA Rental Income
Rental income refers to the money earned from renting out properties that you own. It is an additional source of income for many individuals and needs to be reported to the Canada Revenue Agency (CRA) for tax purposes.
Whether you rent out a room or the entire property, it is your responsibility to declare rental income on your tax return. Failing to report rental income can have serious consequences, including penalties and loss of deductions.
How Does CRA Know About Rental Income?
The CRA has several ways of tracking rental income:
- If you own multiple properties, the CRA may ask for information on how each property is used and registered.
- Tenants who qualify for rent credits may provide information on the landlord and rental property.
- The CRA conducts targeted or random audits throughout the year, looking for abnormalities or inconsistencies in rental income.
- Rental statements from property management firms or rental platforms are reported to the CRA as revenue, indicating that you are a landlord.
- The CRA may share data with other government agencies, such as municipal authorities or land registry offices, to monitor rental income and ensure compliance.
Keeping thorough records is crucial for accurately reporting rental income to the CRA. It not only ensures compliance but also helps in the event of an audit or discrepancy.
Things You Should Know About CRA Income Tracking
Here are some important points to keep in mind about CRA reporting and tracking:
- The Canada Revenue Agency governs property taxes and rental income laws. You can find relevant information on reporting requirements for different types of rental properties on the CRA website.
- You may need to fill out Form T776, the Statement of Real Estate Rentals, to categorize rental income as either business or rental property revenue.
- Rental income must be reported on your income taxes to comply with CRA filing rules. This includes any income received from renting out your property, regardless of the rental duration.
- If you co-own a property with others for business purposes, the taxation is based on the percentage of ownership. Partnership properties are not included in this calculation.
- Non-residents who earn rental income are also required to file for rental income tax. A tax rate of 25% of the gross rental income is imposed on non-resident landlords.
Failure to report rental income can result in fines for negligence and even charges of tax evasion. Additionally, you may lose important deductions, such as the mortgage interest exemption.
By understanding the rules and regulations surrounding rental income, maintaining accurate records, and staying up to date with tax laws, you can ensure compliance and avoid any issues with the CRA.