Report the rental income you earned in the calendar year (from January 1 to December 31) using either the accrual method or cash method.

Accrual method

In most cases, you calculate your rental income using the accrual method. With this method, you:

• report rental income in the fiscal period you earn it, no matter when you receive it
• deduct expenses in the fiscal period you incur them, whether or not you pay them in that period

Incur usually means you either paid or will have to pay the expense.

Cash method

If you have almost no amounts receivable and no expenses outstanding at the end of the year, you can use the cash method. With this method, you:

• report rental income in the fiscal period you receive them
• deduct expenses in the fiscal period you pay them

If you use the cash method and receive a post-dated cheque as security for a debt, include the amount in income when the cheque is payable.

You can use the cash method only if your net rental income or loss would be almost the same if you were using the accrual method.

The CRA uses accrual method in its examples to calculate rental income.

Forms and publications

• Guide T4036, Rental Income
• Form T776, Statement of Real Estate Rentals