13 September 2001 Ministerial Correspondence 2001-0097704 - RENTAL INCOME

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Taxation of rental income and capital expenditures.

Position:

Rental income is required to be included in the person's total income for the year. Entitled to deduct reasonable expenses incurred to earn that income, including depreciation. No entitlement to any other type of federal income tax credit in regard to the capital expenditure for a rental property other than the depreciation expense.

Reasons:

Various provisions in the Act.

September 13, 2001

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your correspondence of July 25, 2001, concerning the Ontario Tenant Protection Act, 1997, and the taxation of rental income under the Income Tax Act.

As the Ontario Tenant Protection Act, 1997 is the responsibility of the Government of Ontario, I can comment only on the issues you raised concerning income taxes.

When a landlord earns rental income from a property, that amount must be included in the landlord's total income for the year. When a landlord increases a tenant's rent, whether the increase is to cover increased operating costs or capital expenditures, the increased rent is included in the landlord's income. The landlord is entitled to deduct reasonable expenses incurred to earn that income, but cannot deduct the total cost of a capital expenditure from income in the same year. Capital expenditures must be depreciated and deducted from income on a gradual basis over a number of years. The person is not entitled to any other type of federal income tax credit in regard to the capital expenditure for a rental property other than the depreciation expense.

For residents of Ontario, the amount of the rental increase would be included in the total rent paid during the year that may qualify for the Ontario property tax credit, included on Form ON 479, Ontario Credits.

I trust the information provided is helpful.

							Yours sincerely,

							Bill McCloskey
							Assistant Commissioner
							Policy and Legislation Branch
Randy Hewlett  957-8973
Finalized:  01/09/10  WP/ps.