Tax Guide for Landlords in Quebec: Rental Income, GST/QST Rules, and Deductible Property Expenses — CPA Firm Near You, Montreal

Introduction

Landlords in Quebec must navigate complex tax rules involving rental income, expense deductions, capital cost allowance, GST/QST on certain rentals, and compliance with Revenu Québec’s reporting requirements. Many landlords miss important deductions or incorrectly classify expenses, leading to reassessments. This guide explains how residential and commercial landlords must report rental income, apply sales-tax rules, claim deductions properly, and how a CPA firm near you in Montreal can ensure accurate, audit-proof filings.

Legal and Regulatory Framework

Under the Income Tax Act and the Taxation Act of Quebec, residential rental income must be reported annually, whether earned from long-term tenants, student rentals, room rentals, or shared accommodations. Residential rent is generally exempt from GST and QST, but commercial rental income is taxable, requiring proper registration once revenues exceed the small-supplier threshold. Deductible expenses include mortgage interest, property taxes, insurance, utilities, repairs, maintenance, condo fees, advertising, accounting fees, and property management costs. Capital cost allowance (CCA) may be claimed on buildings, furniture, and equipment, but doing so can affect the principal residence exemption when selling a property. CRA and Revenu Québec require detailed receipts and documentation for all rental expenses.

Key Court Decisions

Courts have ruled that landlords must clearly distinguish between capital improvements and repairs. Judges routinely deny deductions when taxpayers attempt to deduct capital expenditures as repairs. Cases also confirm that personal-used portions of a property cannot be deducted against rental income. Several rulings emphasize that undocumented expenses, cash payments to contractors, or vague repair invoices will be disallowed. Courts also reinforce that commercial landlords must charge GST/QST properly or face assessments.

Why CRA and Revenu Québec Target Landlords

Landlords are frequently audited because of:
• Misclassification of repairs vs. renovations
• Missing receipts for contractor work
• Underreported rental income (including cash payments)
• Improper GST/QST handling for commercial units
• Mixing personal and rental expenses
• Excessive or unsupported CCA claims

Auditors cross-check bank deposits, lease agreements, Revenu Québec RL-31 filings, and online rental listings to detect discrepancies.

Mackisen Strategy

At Mackisen CPA Montreal, we help landlords organize a complete tax and bookkeeping system tailored to rental operations. We classify expenses correctly, separate repairs from capital improvements, determine GST/QST obligations for commercial rentals, and calculate allowable CCA. We also prepare rental statements, optimize deductions, manage multi-unit allocations, and ensure documentation meets CRA and Revenu Québec standards. If audited, we defend your expense claims, rebuild receipts, and negotiate reductions in reassessments.

Real Client Experience

A Montreal duplex owner deducted major renovation costs as repairs. CRA reassessed the return, claiming these were capital improvements. We reconstructed the renovation documentation, separated capital and current expenses, and reduced the reassessment. Another landlord with a commercial tenant failed to register for GST/QST; we corrected filings, calculated amounts owing, and created a compliant tax-remittance plan.

Common Questions

Are residential rentals taxable under GST/QST?

No. Residential rent is exempt, but commercial rentals are taxable.

What expenses can landlords deduct?

Mortgage interest, property taxes, insurance, repairs, utilities, advertising, condo fees, and property management costs.

What is the difference between repairs and renovations?

Repairs maintain the property’s condition; renovations improve or extend its life, and may need to be capitalized.

Should landlords claim capital cost allowance?

CCA is optional. It reduces taxable income but may affect future tax on sale of the property.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps landlords stay compliant while maximizing deductions. Whether managing a single unit or a full rental portfolio, our expert team ensures precision, transparency, and protection from audit risk.