Guide
Rental property tax in BC: what landlords should know.
Whether you rent a basement suite or own several properties, most rental tax questions come down to a few areas: what you can deduct, how depreciation works, and what happens when you sell.
Reporting rental income
Rental income and expenses are reported on your personal return. If you own the property with someone else, each owner generally reports their share based on ownership. If one spouse funded the purchase, attribution rules can shift the income back to them.
Expenses you can deduct
- Mortgage interest (not principal)
- Property tax, insurance and strata fees
- Repairs and maintenance
- Property management and advertising
- Utilities you pay for the tenant
A repair restores something to its original condition and is deducted right away. An improvement, like a new roof with better materials or an added suite, is capital and depreciated over time. The difference changes this year's tax.
Depreciation and recapture
You can claim capital cost allowance on the building, but it can't create or increase a rental loss. When you sell, depreciation you've claimed may be added back to income as recapture, so claiming it isn't always the right choice.
Renting part of your home
If you rent a suite in your home, you deduct the share of expenses that relates to the rental. Claiming depreciation on that part of your home can affect your principal residence exemption, so it's usually avoided.
Short-term rentals
BC's short-term rental rules limit most short-term rentals to your principal residence in many communities. Short-term rental income is also subject to GST once you pass $30,000 in taxable revenue, unlike long-term residential rent, which is exempt.
Selling a rental
- Half of a capital gain is taxable
- Depreciation claimed may be recaptured as income
- Sales within 365 days may be taxed as business income under federal flipping rules
- BC's home flipping tax can apply to sales within two years of purchase
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