Rental income is any payment you receive for the use or occupation of property such as house, apartments, rooms, space in an office building, real or movable property etc.
Rental income – income you earn from renting a property that you own.
Rental operation – services you provide within your rental property to your tenants such as heat, lighting, laundry, cleaning or security.
Rental property – generally, a building or certain leasehold interests owned by a taxpayer(s) or a partnership that is mainly used to generate gross revenue from rent.
A rental property, other than a building, usually becomes available for use on the earliest of:
- the date you first use it to earn income
- the second year after the year you acquired the rental property
- the time just before you dispose of the property
A rental property that is a building, or part of a building, usually becomes available for use on the earliest of:
- the date when a fully constructed building is purchased or construction of the building is completed
- the date that you rented out 90% or more of the building
- the second year after the year you acquired the building
- the time just before you dispose of the building
When determining the available for use date, a renovation, an alteration, or addition to a building should be considered as a separate building.
You may be able to claim CCA on a building that is under construction, renovation, or alteration before it is available for use. You can deduct CCA that you have available on such a building when you have net rental income from it. The CCA that you can deduct is restricted to the amount of net rental income you have after you deduct any soft costs for constructing, renovating, or altering the building. For an explanation of soft costs, see Construction soft costs.
Capital cost – the amount on which you first claim capital cost allowance (CCA). The capital cost of a property is usually the total of the following:
- the purchase price (not including the cost of land, which is not depreciable)
- the part of your legal, accounting, engineering, installation, and other fees that relate to buying or constructing the property (not including the part that applies to land)
- the cost of any additions or improvements you made to the property after you acquired it, if you did not claim these costs as a current expense (such as modifications to accommodate persons with disabilities)
- for a building, soft costs (such as interest, legal and accounting fees, and property taxes) related to the period you are constructing, renovating, or altering the building, if these expenses have not been deducted as current expenses
For more information on current expenses, see Current or capital expenses.
Legal and accounting fees for buying a rental property are allocated between the cost of the land and the capital cost of the building. If land is acquired for rental purposes or for constructing a rental property, the legal and accounting fees apply to the land.
Capital cost allowance (CCA) – you may have acquired depreciable property like a building, furniture, or equipment to use in your rental activity. You cannot deduct the initial cost of these properties in the calculation of the net income of the rental activities for the year. However, since these properties wear out or become obsolete over time, you can deduct the cost over a period of several years. This deduction is called CCA.
Capital property – generally any property, including depreciable property, you buy for investment purposes or to earn business income. Common types of capital property include principal residences, cottages, stocks, bonds, land, buildings, and equipment used in a business or rental operation.