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Rental Income Tax Formula:
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In Canada, rental income is treated as business income and must be reported on your tax return. You can deduct reasonable expenses from your gross rental income to determine your taxable amount.
The calculator uses the formula:
Where:
Explanation: The calculator first determines your taxable rental income by subtracting deductible expenses from gross rental income, then applies your marginal tax rate to calculate the tax owed.
Details: Accurate calculation helps landlords comply with tax obligations, claim all eligible deductions, and avoid penalties for underpayment. It also assists in financial planning for rental properties.
Tips: Enter gross rental income in CAD, all deductible expenses in CAD, and your marginal tax rate as a percentage. Ensure all values are valid (income > 0, expenses ≥ 0, rate between 0-100).
Q1: What expenses are deductible for rental properties?
A: Common deductions include mortgage interest (not principal), property taxes, insurance, repairs, maintenance, utilities, property management fees, and depreciation (CCA).
Q2: How do I determine my marginal tax rate?
A: Your marginal rate depends on your province and total taxable income. Check the Canada Revenue Agency's tax brackets for current rates.
Q3: Is rental income taxed differently if it's my primary residence?
A: Yes, different rules apply if you rent part of your primary residence. Only a portion of expenses may be deductible based on the space rented.
Q4: What if my rental property shows a loss?
A: Rental losses can often be deducted against other income, but there are restrictions (especially if the loss is due to CCA). Consult a tax professional.
Q5: Do I need to charge GST/HST on residential rent?
A: Generally no, residential rent is exempt from GST/HST. Different rules may apply to commercial properties.