Accounting methods

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:

• include rents in income for the year in which they are due, whether or not you receive them in that year; and
• deduct your expenses in the year you incur them, no matter when you pay them.

Cash method

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

• include rents in income in the year you receive them; and
• deduct expenses in the year you pay them.

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

When we give examples, we use the accrual method of reporting rental income.

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

• include rents in income in the year you receive them; and
• deduct expenses in the year you pay them.

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

When we give examples, we use the accrual method of reporting rental income.

Forms and publications

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

Date modified:

2017-01-03