T776 or T2: two different filings, one standard
Most GTA landlords hold personally and file the T776 Statement of Real Estate Rentals, each co-owner reporting their own share. Corporate portfolios file a T2 with financial statements behind every number. The mechanics differ more than people expect:
Co-owned properties add a matching problem: the CRA sees every return, so two spouses reporting shares that do not add up, or that quietly changed ratio since last year, invite questions. We prepare co-owners together, with the split anchored to ownership and actual contribution rather than to whichever allocation looked best that spring.
| What differs | Personal (T776) | Corporate (T2) |
|---|---|---|
| The return | A schedule inside your T1 | A full corporate return with statements |
| Deadline | April 30 with the T1 | Six months after year-end; balance usually due in two |
| Rate on net rent | Your marginal rate, up to 53.53% in Ontario | About 50.17%, partly refundable when dividends are paid |
| Rental losses | Offset your other income | Stay locked inside the corporation |
CCA on the building: claim it or preserve it
A residential rental building is Class 1 property at 4% declining balance, and claiming it is optional every year. The claim shelters net rent at your marginal rate today; the price is recapture, because every dollar of CCA comes back as fully taxable income when you sell above the depreciated cost, while the appreciation itself is only a 50%-inclusion capital gain. Three constraints shape the call:
- CCA cannot create or deepen a rental loss for an individual landlord. It only works where there is net rent to shelter.
- Each rental building costing $50,000 or more sits in its own CCA class. Selling one triggers its own recapture; you cannot bury it in a pool with the survivors.
- Claiming closes a door. Move into the property later and the election that defers tax on that change of use is unavailable once CCA has been claimed.
Our default is to run the sale math before the first claim, not after the last one. A top-rate landlord holding for decades often should claim; one who might occupy the unit someday, or sell within a few years in an appreciating market, often should preserve. Appliances and equipment in Class 8 at 20% are an easier yes, since recapture on them is modest.
Deductions we take, and the ones we refuse
The dependable list: mortgage interest as charged, provided the borrowing traces to the property; property taxes; insurance premiums including Ontario's 8% sales tax on them; condo fees; utilities you cover; advertising a vacancy; management and professional fees. Costs through a vacancy stay deductible while the unit is genuinely available and marketed for rent.
The refusals matter just as much. Principal payments are never an expense. Your own labour is worth nothing on a T776. Land transfer tax on the purchase joins the cost of the property rather than the current-year expenses. And vehicle costs are tighter than most landlords expect: with a single rental, the CRA generally accepts them only if you personally do the repairs and haul the tools; owning two or more properties widens the claim to reasonable travel for rent collection, supervision and repairs.
The year you sell
A sale year puts three numbers on one return: recapture of every CCA dollar claimed, a capital gain at 50% inclusion over your adjusted cost base, and the land-building allocation that drives both. That allocation is not free-form; specific rules exist to stop splits that manufacture a terminal loss on the building while the land gain rides away lightly taxed. We build the sale filing from the original purchase documents and every capital improvement since, so the adjusted cost base is proven rather than estimated. Commissions and legal fees on the sale reduce the gain; what the principal residence exemption does not do is shelter a property that was purely a rental, no matter how long you owned it.
When the CRA writes about your rental
Rental schedules are a steady target of CRA processing reviews: requests for mortgage statements, repair invoices, proof a unit was truly available for rent. The reply is quick when the file was built for it and expensive when it was not. We prepare landlord returns through Personal Tax Filing and Corporate Tax Filing with that file already assembled, and CRA Audit and Review Support answers the letters nobody saw coming. Every engagement begins with a free 15-minute discovery call and a written quote.
Source: CRA — T4036 Rental Income guide.
