Managing a rental property can be a great way to generate a stable income and grow your wealth. Remember though that rental income is taxable. You must declare and pay tax on your rental earnings to the Canada Revenue Agency (CRA) by completing a T776 form, also known as the Statement of Real Estate Rentals.
Learn how to fill out a T776 form to manage your rental expenses, minimize your tax bill, and avoid penalties from the CRA.
What is a T776 Form, Statement of Real Estate Rentals?
Any revenue generated from renting a property is subject to income tax in Canada. You must report your total net profit (income minus expenses) or loss to the CRA each calendar year.
Form T776 is used to report income and expenses related to renting out real estate and providing basic amenities like heat, parking, and appliances.
Submitting this form isn’t mandatory: you’re free to disclose your income and expenses using your own financial statements. However, the CRA encourages property owners to use the T776 form. We recommend doing the same, especially if you’re starting out as a landlord.
Mac's Pro Tip
Step by step: How to complete the T776 form
Access the T776 form here, then use our breakdown below to complete the form. You can also use the following links to go to each section:
Part 1 – Identification
In Part 1, you provide general details about yourself and your rental operation.
Start by entering your name, address, city, province, postal code, and social insurance number (SIN). Next, complete the following:
Fiscal period
For tax reporting purposes, the fiscal year for rental properties always starts on January 1 and ends on December 31. The only exception would be during your first year of operations. If your property was available for rent on May 15, you would enter this date in the “from” field. All subsequent years would use the period from January 1 to December 31.
Was this the final year of your rental operation?
Will you be shutting down your rental business in the current tax year? If so, choose “Yes.” If not, select “No.”
Tax shelter identification number
A tax shelter is an investment arranged in a way that reduces the amount of tax you owe to the CRA. If you have a tax shelter identification number, enter it in the field provided. You can find this eight-digit number on your T5013 slip.
Partnership business number
Fill out this field only if you operate your rental with one or more individuals. Enter your partnership business number here, which consists of nine digits. Then, provide your percentage share of the business in the field directly to the left of the tax shelter identification number.
Name and address of person of firm preparing this form
Will someone else be preparing form T776 on your behalf? If so, enter their name and address in this area.
Business number or account number
In this section, provide your 15-character RZ account number if you have one. It has three parts:
Part 2 – Details of other co-owners and partners
Complete this section only if you co-own the rental property with another person or operate it as a partnership with them. Fill out your co-owner’s or partner’s name, address, share of the income or loss for the year, and their percentage of ownership in the property.
A co-owner is someone with whom you share ownership of the rental property, typically your spouse or common-law partner.
In some cases, the co-owner qualifies as a partner. The CRA defines a partner as two or more people engaged in a business activity to generate a profit, either with or without a formal agreement.
As such, co-owning a rental unit with someone doesn’t automatically mean they’re your partner. To learn more about whether a relationship constitutes a partnership, check out Income Tax Folio S4-F16-C1, What is Partnership?
Part 3 – Income
The first thing you’ll notice in Part 3 are instructions to use the accrual method when calculating your total rental income and expenses.
Under the accrual method, you record income when it’s due (in this case, the first day of each month) instead of when the money arrives in your bank account.
Conversely, under the cash method, you record income only when you receive the funds. While the CRA prefers that you use the accrual method, it’s okay to use the cash method to keep things simple.
Enter the address of your rental property, the number of units it contains, and the gross income earned (income before deducting expenses).
Next, fill out the following areas as needed:
Mac's Pro Tip
You can deduct unpaid rent from your gross rental income. Doing so will lower your tax liability.
Part 4 – Expenses
In Part 4, you deduct eligible expenses you incurred from running your property:
Area A – Calculation of capital cost (CCA) claim
Area A is where you calculate capital cost allowance (CCA), otherwise known as depreciation. Each year, you can claim a maximum amount of CCA as an expense to account for the gradual loss of value of your rental assets, including the building itself.
Here’s how to calculate CCA in a nutshell:
- Step 1: Determine what CCA classes your assets belong to.
- Step 2: Sort each asset according to its class and then add the total you paid to purchase them.
- Step 3: Multiply the total cost of each class by its CCA rate and then add the results together.
- Step 4: The result is the allowable CCA you can deduct as an expense for the year.
Once you figure out your allowable CCA, enter the number on line 9936 of form T776.
The rules and mechanics behind CCA can be tricky to navigate, even for seasoned landlords. For more details about its calculation, visit the CRA’s in-depth guide on how to complete the capital cost allowance (CCA) charts. If you need more help, consider hiring a tax expert.
Areas B, C, D, E, and F
If you’ve purchased or sold rental property assets during the year, fill out the applicable sections from B to F before completing Area A.
Our final thoughts
At first glance, a T776 form looks intimidating: it’s five pages long with multiple sections of jargon. To simplify the task of completing it, assemble all the details you need, such as your business account number, list of expenses, and assets eligible for CCA.
If you need assistance or have questions about specific sections, consult an accountant or other tax expert. While the CRA provides the T776 form online, you can also create it automatically through your tax software. To learn more about managing your taxes as a landlord, visit our financial management resources.
