Five essential tax practices for owners and co-owners of rental properties

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Owning or co-owning a rental property comes with many responsibilities, including building maintenance and repairs, tenant management and compliance with tax obligations. Below are five things to consider regarding your tax obligations, along with tips to help you integrate them into your management practices.

Five essential tax practices for owners and co-owners of rental properties

1-Reporting your rental income

  • Myth: “I only own a small 4½; no need to report this income on my income tax return.”

  • Good practice: Keep accurate accounting records of all your rental income: rent, parking fees, utilities, furnished items and exchanges of services (such as a rent reduction in exchange for grounds maintenance). The value of the service provided must be included in rental income.

  • Tip: Use accounting software or an Excel spreadsheet to track cash inflows and outflows. You must include all your net rental income in calculating the total income reported on your income tax return.


2- Deducting eligible current expenses

  • Myth: “It’s not worth deducting my maintenance expenses.”

  • Good practice: Keep all your invoices and receipts and learn how to determine deductible expenses. Generally, these are the current and recurring expenses associated with operating a property you rent, such as maintenance and repair costs to restore the property to its original condition, insurance premiums and property taxes relating to the property, certain borrowing costs, interest on loans taken out, the cost of heat, electricity, water and Internet and management fees. These expenses are usually deductible from your rental income in the year they are incurred to earn that income, and they are not considered personal expenses.

  • Tips:
    • Keep your records and supporting documents (invoices, leases, mortgage deeds, notarial acts, bank statements, line of credit statements, etc.) electronically.
    • Ask contractors to use the property address, not your home address, on invoices issued for work done.
    • Provide all the required information and documents to your accountant so that they can help you deduct all eligible expenses from your rental income.


3- Reporting information on businesses that have carried out work

  • Myth: “I don’t need to report who carried out the work on my property. I’ve kept my invoices; that’s enough.”

  • Reality: If you incurred expenses during a taxation year or fiscal period for the renovation, improvement, maintenance or repair of a property that you rent for income, you must provide information about the person or business that carried out the work by completing form TP-1086.R.23.12-V, Costs Incurred for Work on an Immovable. 

  • Good practice: Be sure to enter the requested information for any person or business that carried out work on the form and include it with your income tax return for the relevant year. If you do not have to file an income tax return for the year, you must still send us the completed form by the deadline for filing income tax returns.


4- Checking whether you are subject to GST and QST

  • Myth: “I don’t need to register for consumption taxes, as they don’t apply to residential rental properties.”

  • Reality: The lease of your residential complex is tax-exempt only if your property meets the definition of a residential complex and its use meets the following two criteria:

    1. The residential complex or unit in the complex is rented to an individual under a lease or similar agreement for continuous occupation as a place of residence or lodging by that individual for a period of at least a month.

    2. The unit is rented for $20 or less per day.

  • Good practice: In general, the criteria above must be met in order to benefit from the exemption applicable to the lease of your residential complex. Some properties may not be considered residential complexes depending on the situation. It is best to check with Revenu Québec or a specialist to see if you need to register for consumption taxes, including the tax on lodging (in some cases).


5- Filing RL-31 slips

  • Myth: “I forgot to provide my tenant with the RL-31 slip. It shouldn’t be a big deal.”

  • Reality: You must send the RL-slips 31 to Revenu Québec and to all your tenants and subtenants by the end of February each year. The slips must be filed for all eligible dwellings for which rent was paid or payable on December 31.

  • Reason: The RL-31 slip is important for tenants and subtenants who have a lease on December 31 because it allows them to claim all the solidarity tax credit amounts they qualify for when they file their income tax return.

  • Solution: Schedule an annual reminder and use Revenu Québec's online services to quickly and easily prepare and send the slips. 


In summary: 

By adopting management practices that integrate your tax obligations, you will be able to comply with them, in addition to taking full advantage of the benefits of renting.


Need help?

Revenu Québec offers a French-only online information session entitled Les propriétaires d’immeubles locatifs et la fiscalité. To take part, see the information under Impôt des citoyens at Séances d'information offertes à Revenu Québec.

This session is given a number of times per year. Check the page regularly for upcoming dates and other topics that may interest you. 

Upcoming dates: 

Revenu Québec also offers free individual and personalized meetings. You can ask questions about your rights and obligations as a landlord. For more information and to find out how to sign up, click One-on-One Meetings.

More information is available anytime under Landlord on Revenu Québec’s website.

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