Reporting Rental Income in Canada 2025

Owning rental property can be one of the most powerful ways to build long-term wealth—but if reported incorrectly, it can also become one of the easiest ways for the CRA and Revenu Québec to trigger an audit. In 2025, both tax agencies are using AI-based data matching to track rental transactions through bank deposits, Airbnb listings, and property registries. Undisclosed or underreported rental income is now automatically flagged for review.

Thousands of Canadian property owners lose money each year by misreporting rental income or claiming deductions incorrectly. Some face heavy penalties, reassessments, and even criminal investigation for failing to declare short-term rental income or misclassifying personal-use properties. Others lose thousands in legitimate deductions because they file without professional guidance.

At Mackisen CPA Auditors Montreal, we help landlords, investors, and property owners report their rental income accurately and strategically. We ensure every income source, expense, and claim complies with CRA and Revenu Québec standards—while maximizing your tax savings and keeping your investments fully protected.

Legal and Regulatory Framework

Income Tax Act (Canada)
Section 9: Requires inclusion of rental income as business or property income.
Section 18(1): Limits deductions to reasonable expenses incurred to earn income.
Section 20(1)(a): Allows interest deductions on funds borrowed to purchase or improve a rental property.
Section 110.6: Governs capital gains and principal residence exemptions when selling a property.

Tax Administration Act (Quebec)
Requires reporting of all Quebec-based rental income and applies provincial penalties for late or false declarations.

Mackisen works with property owners to file accurate rental income statements, ensure CRA Form T776 and Quebec TP-128 are properly completed, and verify all eligible expenses for compliance and efficiency.

Key Court Decisions

Guindon v. Canada (2015): False or omitted income declarations are subject to CRA penalties.
Venne v. The Queen (1984): Ignorance of income classification does not excuse underreporting.
Loyola Construction Ltd. v. Canada (1992): Incomplete records allow CRA to estimate income and disallow expenses.

These decisions confirm one thing—accuracy and documentation are your only protection when reporting rental income.

Why Accurate Rental Income Reporting Matters

The CRA and Revenu Québec require landlords to report all rental income, whether earned through long-term tenants, short-term rentals, or mixed-use properties. Failing to declare or incorrectly classifying income can trigger serious consequences, including:

• Reassessment of multiple years of tax returns

• Interest on undeclared income

• Denied deductions for lack of documentation

• Potential fines or criminal investigation for repeated non-compliance

Common CRA Audit Triggers in 2025:

• Unreported Airbnb or short-term rental income

• Missing rental receipts or lease agreements

• Claiming personal-use expenses (mortgage principal, renovations for personal areas)

• Reporting rental income under the wrong property type (personal vs business use)

• Inconsistencies between property registries, bank deposits, and tax filings

Mackisen’s Rental Property Compliance and Optimization Strategy

1. Income Verification: Identify and reconcile all rental income from tenants, platforms, and financial accounts.

2. Expense Maximization: Claim eligible deductions including mortgage interest, property taxes, utilities, maintenance, and management fees.

3. Recordkeeping: Create audit-proof documentation with receipts, invoices, and bank statements.

4. Federal–Provincial Coordination: Ensure consistency between CRA (T776) and Revenu Québec (TP-128) filings.

5. Long-Term Tax Planning: Plan capital gains, depreciation (CCA), and future property sales to minimize tax impact.

Every Mackisen filing includes a complete compliance audit and a strategic tax plan—protecting your rental income and ensuring peace of mind.

Real Client Experience

A Montreal investor underreported short-term rental income and faced a $22,000 reassessment. Mackisen filed corrections, verified records, and negotiated penalty relief, reducing the final balance by 70%.
A Quebec duplex owner claimed ineligible renovation expenses. Mackisen reconstructed the books, filed amended returns, and recovered $5,800 in legitimate deductions.

Common Questions

Do I have to report Airbnb or short-term rental income? Yes. CRA and Revenu Québec consider all rental income taxable, regardless of duration.
Can I deduct mortgage payments? Only the interest portion is deductible—not principal repayments.
Can I claim home expenses if I live in part of the property? Yes, but only for the portion used for rental purposes. Mackisen calculates precise allocation ratios.
What if I didn’t declare rental income from previous years? Mackisen can file retroactively and apply for CRA’s Voluntary Disclosure Program to minimize penalties.

Why Mackisen

At Mackisen CPA Auditors Montreal, we help property owners achieve complete compliance while maximizing legitimate deductions. We protect you from CRA audits, optimize your after-tax rental returns, and ensure your property investments grow with confidence and security.

We combine deep tax expertise, real estate knowledge, and genuine care for our clients’ financial success. Because your property isn’t just an investment—it’s your legacy.

Call Mackisen CPA Auditors Montreal today for your 2025 Rental Income and Property Tax Review. The first consultation is free, and your protection begins immediately.