All the Numbers

Renting out a suite

From the All the Numbers wiki · Renting part of a home

Renting out part of the home you live in is often called house hacking. It covers a basement suite, a rented room, one side of a duplex or a unit in a triplex. In each case the home has two uses at once, and the tax system treats the rented part as a small business in property while the rest stays a personal home. This entry covers the income and the costs. What the rental does to the tax on a later sale is a separate question, and so is how a lender counts the rent.

The income

Gross rental income is the rent actually earned in the year. There is no deduction for vacancy; a vacant month is rent that did not arrive.[1] In All the Numbers, vacancy is an assumption that lowers the projected rent. It starts at 3.1%, the national vacancy rate of purpose-built rental apartments in CMHC's 2025 survey; a suite's own turnover may differ.[2] Rent is added to your other income and taxed at your own marginal rate. A couple who own a home together each report their share of the rent and the costs, which is half each unless the plan says otherwise.[3]

The costs you can deduct

Costs that belong only to the rented area, such as a repair inside the suite, are deductible in full. Costs of the whole building, such as property tax, insurance, interest and utilities, are split between the personal and the rented area by square metres or by rooms. If three of twelve rooms are rented, the rented share is 25%.[4]

The CRA's guide lists the current expenses that qualify: advertising, insurance, mortgage interest, professional and management fees, property taxes, utilities, and repairs and maintenance. It also lists what does not qualify: land transfer tax (which is added to the cost of the property), mortgage principal, penalties, the value of your own labour, and capital improvements, which can only be written off through capital cost allowance.[5] Fees to obtain a mortgage on a rental property, such as an appraisal, a broker, mortgage legal fees or the default-insurance premium, are deducted evenly over five years rather than at once. The deduction goes on if the renting stops, and whatever is left is deducted in the year the mortgage is paid off, for example on a sale.[6] Interest has its own test, described in interest on borrowed money.

When the rental loses money

If the expenses were incurred to earn income, a rental loss can be deducted against your other income. There is no loss for a cost-sharing arrangement, such as a relative who pays a small amount towards the groceries and upkeep, and none where rent to someone you are not at arm's length is set below market. Expenses of renting part of the home are also barred where there is no reasonable expectation of profit.[7] A loss cannot be made bigger by claiming capital cost allowance; the claim stops at the net rental income.[8]

If a loss is larger than all your other income for the year, the excess is a non-capital loss. It can be deducted from taxable income in the 20 years that follow, and income for a year cannot go below nil.[9]

How a lender counts the rent

Lenders add part of the rent to your income when they test whether you qualify. CMHC will count up to 100% of the gross rent from a secondary suite in an owner-occupied two-unit home.[10] Conventional lenders often count less, and one common policy adds 50% of the gross rent.[11] For an insured mortgage on an owner-occupied building of three or four units, the largest loan is 90% of the price, against 95% for one or two units; see mortgage default insurance.[12]

What All the Numbers does

  • Asks for the share of the floor space that is rented, the monthly rent, a vacancy rate and a yearly rent growth, and starts the rent in the month the purchase closes. Because the rented part is entered as a share of the floor area, a suite, a rented room or the side of a duplex all fit the same inputs.
  • Deducts the property tax, maintenance, insurance and utilities at the rented share, and the mortgage interest at the same share. It never deducts mortgage principal or land transfer tax.
  • Does not deduct the default-insurance premium or the fees to obtain the mortgage against the rent; the premium and its tax are treated as closing costs.
  • Taxes the net rent each year, for each owner, with the rest of the owner's income, and carries an excess loss forward as a non-capital loss.
  • Treats the rent as arm's-length market rent and the expenses you enter as qualifying. It does not test for a reasonable expectation of profit or for a below-market rent to a relative.
  • Counts the full rent of a two-unit home as income for the lender screen, and prices the home as two units when a suite is planned.
  • Never claims capital cost allowance, so the rented share stays covered by the principal-residence exemption under All the Numbers' assumption that the rental is ancillary.
  • On the house page, shows what the suite brings in after tax as its rent less the income tax on its own net rent: each owner's return for the year is worked out again without the suite's rent and expenses, with everything else left as it is. Tax on the savings the rent leaves invested is not counted against the suite; those savings and their tax are in net worth.[13]
  • Shows what rent the suite needs: the plan is run again at a range of suite rents, each taxed the same way, and the money gone a month with the suite is set against the rent instead. The rent at which the two are equal is read off a straight line between the two rents either side of it, so it is shown as an approximate figure.[13] The rent you entered is taken as market rent to a stranger, so a year the suite loses money deducts the loss from your other income, in the plan and at every rent tried from yours up. A rent tried below yours is below market, which CRA treats as sharing costs rather than a business, so a year it loses money deducts nothing, and a year it makes money is taxed as usual. The point at your own rent is the same as the plan.[14]
  • Shows what the suite has added to your net worth by each year: net worth with the suite, less the same plan with the suite left empty. That includes what the rent's savings earn. It does not include the tax on the rented share's gain, which comes only when the home is sold.[15]
  • Compares other ways of renting it out (another share, rent or number of years) by what each adds to your net worth over the same plan with no suite. It measures them 5, 10, 15, 20 and 25 years after you buy, counting the year you buy as the first, and in the year you sell, not at the end of the plan: over decades the savings from any early difference keep growing, so the gap at the end is larger than the choice itself.[16]
  • When the suite is not attested as ancillary, sets the rent against the exemption it gives up. For each year you could sell in, it adds up the suite's rent after tax to that year, and compares it with the extra tax a sale that year would bring because of the suite: the tax on the sale with the suite, less the tax on the same sale with the suite left empty.[17]

Renting for a few years, and rent control

You can rent the suite for a set number of years. The rent, and the interest and the rented share of the costs you deduct, stop in the month the rental ends; what happens to the gain when it stops is in renting out part of your home.

In Ontario and British Columbia a tenant who stays can only be charged a limited increase each year. In Ontario the guideline is set from the province's consumer price index and can never be more than 2.5%; it was 2.1% for 2026. A new tenant's rent is whatever you agree. A suite in a house that became a separate unit after 15 November 2018 is not covered by the guideline at all.[18][19] British Columbia's limit was 2.3% for 2026, also from the province's consumer price index.[20]

In Manitoba and Prince Edward Island the limit is on the rent charged for the suite, not on one tenant's rent, so a new tenant pays the old rent plus the guideline. Manitoba's guideline follows the province's consumer price index but is never below 1% or above 3%; a suite renting for $2,000 a month or more from 2027, and a new building for its first 20 years, are not covered.[21][22] Prince Edward Island's yearly increase is set from its consumer price index and can never be more than 3%.[23]

When you choose rent control, All the Numbers starts each tenant at the market rent you entered (grown at the rent growth rate). Each January the tenant's rent rises by the smaller of that growth and the guideline, and it goes back to the market rent when a new tenant moves in, every so many years as you choose. In Manitoba and Prince Edward Island a new tenant does not bring the rent back to the market rent. No one knows future guidelines, so All the Numbers takes them to be your plan's inflation rate, capped where the law caps it.[24]

What it does not do

  • Short-term rentals, and the denial of expenses for units that do not meet municipal rules.
  • Rent to a relative below market, or a cost-sharing arrangement. All the Numbers takes the rent and the expenses you enter as qualifying.
  • The rules for three- and four-unit buildings in the lender screen and the insurance limit. The engine holds them, but All the Numbers does not offer those layouts yet, so your plan does not include them.

See also

  • Capital cost allowance · Capital cost allowance (CCA) is the tax write-off for the building part of a rental property, at 4% of the remaining balance a year for most rental buildings. Claiming it can cost the principal-residence exemption on a rented home and creates recapture on a sale, so All the Numbers never claims it.
  • Capital losses and the superficial-loss rule · A loss on a non-registered investment first cancels capital gains in the same year; any excess carries back three years or forward without limit. A loss is denied if the same investment is bought back within 30 days.
  • Combined marginal tax rates · The marginal rate is the federal and Ontario tax on the next dollar of income. In 2026 it runs from 19.05% to 53.53% on ordinary income, and the top rate is lower on capital gains and dividends than on interest.
  • How a mortgage payment is worked out · A fixed-rate Canadian mortgage compounds its interest twice a year, not monthly, so the monthly payment comes from a rate slightly lower than the quoted rate divided by twelve. The default rate is 4.27%, and the rate stays fixed for the whole amortization.
  • Interest on borrowed money · Interest is deductible against rent only for money used to earn income from property, judged by what the money is used for now and not by what secures the loan. A refinance keeps the use of the loan it replaces, and a repayment reduces the deductible and non-deductible parts together.
  • Land transfer tax · Ontario charges a tax on the price of a home, rising from 0.5% to 2.5% in brackets, and Toronto adds a second one of its own. A first-time buyer gets a refund of up to $4,000 from Ontario and $4,475 from Toronto.
  • Mortgage default insurance · A buyer putting down less than 20% must buy mortgage default insurance from CMHC or a competitor. The premium is 2.80%, 3.10% or 4.00% of the loan depending on the down payment, is added to the mortgage, and carries 8% Ontario sales tax paid in cash at closing.
  • Rent, and when it stops · Rent is its own line in the plan rather than part of living expenses, and it stops the month your first home closes — because a household that has bought is not paying both. Give it an end date if you would keep renting past that.
  • Renting out a cottage · Rent from a cottage you also use is taxable. Its shared costs and mortgage interest are deductible only for the weeks it is rented, a loss offsets other income only when it is run as a business, and a short-term rental may need a licence where it is.
  • Renting out part of your home · Suite income is taxable and its expenses are deductible on the rented portion, but renting can also limit the principal-residence exemption on the eventual sale. All the Numbers taxes the gain on the rented share when the home is sold, unless you tick that the rental needed no structural change and you claim no capital cost allowance; then the whole gain stays exempt.
  • Renting versus buying · All the Numbers compares a plan that buys a home with the same plan that never buys, and the money the home would have taken stays in your accounts and is saved like any other leftover cash. It shows when owning pulls ahead on net worth, if it does. It is a comparison under assumptions, not a verdict.
  • Stress tests · A stress test reruns the whole plan with one thing made worse, such as a higher mortgage rate at renewal or a year of lost income, and reports how far final net worth moves and whether the plan still pays its bills. It carries no probabilities.
  • What a house costs to hold · Property tax, maintenance, insurance and utilities are estimated as rates against the home's value, with sourced defaults. Property tax then grows with inflation, maintenance and insurance with the home's value, and utilities with inflation.
  • When the plan runs short of cash · When a month needs more money than the plan has, it draws savings in a set order, then borrows on a home equity line at 5.13% and an unsecured line at 8.38%, as far as a lender would lend. When no lender would lend more, the projection stops.
  • Would a lender write the mortgage? · Lenders test a mortgage against two ratios, GDS at 39% and TDS at 44% of gross income, using a stress-test rate of the contract rate plus 2 points or 5.25%, whichever is higher. All the Numbers runs this screen on the income entered for today.

References

  1. ↑Guide T4036, Rental Income — Part 3 Income / Line 8299 Total gross rental income · Gross rental income is total rents actually earned in the year (line 8141 / 8299); no vacancy-allowance deduction exists · effective 2025-01-01
  2. ↑CMHC — Rental Market Report 2025, Highlights: "The average vacancy rate for purpose-built rental apartments rose to 3.1%, up from 2.2% in 2024." · Share of the year a rented suite is assumed to stand empty, the planner's starting figure until changed: the national vacancy rate of purpose-built rental apartments · 3.1% · effective 2025-10-01
  3. ↑CRA T4036 Rental Income — co-ownership; our convention · A couple's home whose ownership shares are not given is owned 50/50; each co-owner reports their share of rental income and expenses, and every owner's FHSA and Home Buyers' Plan may fund the purchase; reported on the run · 50% · effective 2026-09-25
  4. ↑Guide T4036, Rental Income — Personal portion of total expenses · T4036 rule: split whole-property expenses between personal and rented area by square metres or rooms; expenses relating only to the rented area are 100% deductible · effective 2025-01-01
  5. ↑Guide T4036, Rental Income — Chapter 3 Expenses / Expenses you cannot deduct · T4036 deductible current expenses and explicit non-deductibles · effective 2025-01-01
  6. ↑Guide T4036 Rental Income — Chapter 3 · Fees to obtain a mortgage on a rental property (appraisal, broker, application, mortgage legal, default-insurance premium) are deducted evenly over this many years · 5 years · effective 1972-01-01
  7. ↑Guide T4036, Rental Income — Rental losses / Renting below fair market value · Rental losses deductible against other income if incurred to earn income; barred for cost-sharing arrangements and where no reasonable expectation of profit · effective 2025-01-01
  8. ↑Guide T4036 Rental Income — Chapter 4 · CCA cannot create or increase a rental loss: the claim is capped at net rental income before CCA (Reg. 1100(11)) · effective 1972-01-01
  9. ↑ITA 111(1)(a), 111(8) "non-capital loss"; ITA 3(c)–(f) · Non-capital losses (losses from business and property in excess of the year's s.3(c) income) may be deducted in computing taxable income for the 20 following years (line 25200); income for a year cannot be below nil (ITA 3(f)) · 20 years · effective 2006-01-01
  10. ↑CMHC — Calculating GDS / TDS ("up to 100% of gross rental income from the secondary suite") · Suite gross-rent add-back, 2-unit owner-occupied (insured) · 100% · effective 2023-01-01
  11. ↑CMHC — Rental income · Rental income policy for qualification: the share of gross rent added to income (an underwriting convention; the owner-occupied 2-unit variant is its own rule) · 50% · effective 2021-06-01
  12. ↑CMHC Purchase — homeowner loans · Maximum insured loan-to-value for owner-occupied 3–4 unit properties · 90% · effective 2024-12-15
  13. ↑CRA T4036 Rental Income — net rent is taxed with the owner's other income; our convention · What a suite brings in after tax, on /house, is the year's suite rent less the income tax its own net rent adds: each owner's return for the year assessed again without the suite's rent less expenses, everything else on the return held as it is. Tax on the savings the rent leaves invested is not the suite's; it is in net worth · effective 2026-10-12
  14. ↑CRA Guide T4036, Rental Income — "You cannot claim the expenses for renting part of your property if you have no reasonable expectation of making a profit"; cost-sharing arrangements; Stewart v. Canada, 2002 SCC 46 ¶52-60 (an activity with a personal element must be carried on in a sufficiently commercial manner) · The suite rent entered is taken as arm's-length market rent, so its loss is deducted from other income in the plan. On /house "What rent does the suite need?", a swept rent at or above it deducts its loss the same way; a swept rent below it is below market (a cost-sharing arrangement) and deducts none: in a year the suite loses money it reports nothing (rent and expenses both left out), and a year it makes money is taxed as usual · effective 2026-10-16
  15. ↑CRA T4036 Rental Income — net rent is taxed with the owner's other income; our convention · On /house, what the suite has added by a year is the household's net worth that year with the suite less the same plan with the suite left empty · effective 2026-10-12
  16. ↑CRA T4036 Rental Income — net rent is taxed with the owner's other income; our convention · On /house, ways to rent out a home are compared by what each adds to net worth over the same plan with no suite, at the end of the 5th, 10th, 15th, 20th and 25th calendar year owned (the purchase year counted as the first) and in the sale year, not at the plan's end, where decades of compounding widen any gap · effective 2026-10-21
  17. ↑CRA Income Tax Folio S1-F3-C2, Principal Residence ¶2.57–2.59 (a rented share in a structural change is not a principal residence); our convention · On /house, the suite's two sides at a sale in year N are its rent after tax collected to the end of N (summed, not grown) and the exemption given up, the tax on a sale in N with the suite less the tax on the same sale with the suite left empty · effective 2026-10-12
  18. ↑Residential Tenancies Act, 2006 (Ontario) · Ontario rent increase guideline ceiling: the guideline for a calendar year, a 12-month average of Ontario CPI, shall be not more than this; it limits increases to a sitting tenant, not the rent agreed with a new tenant (s.113) · 2.5% · effective 2012-06-19
  19. ↑Rent increase guideline — ontario.ca · Ontario rent increase guideline for increases taking effect in 2026 · 2.1% · effective 2026-01-01
  20. ↑B.C. Government news release, 26 August 2025; Residential Tenancy Act ss.42-43 · British Columbia maximum allowable rent increase for 2026: the 12-month average change in B.C. all-items CPI ending in July of the year before; it limits increases to a tenant (RTA ss.42-43), not the rent of a new tenancy · 2.3% · effective 2026-01-01
  21. ↑Residential Rent Regulation, M.R. 156/92 (Manitoba) · Manitoba rent increase guideline floor: when the 12-month average of Manitoba CPI to June 30 of the prior year is below the Bank of Canada inflation-control target range, the guideline is the bottom of the range; it limits the rent charged for the unit, so a new tenant takes the prior rent plus the guideline · 1% · effective 2021-01-01
  22. ↑Residential Rent Regulation, M.R. 156/92 (Manitoba) · Manitoba rent increase guideline ceiling: when the CPI average is above the Bank of Canada inflation-control target range, the guideline is the top of the range · 3% · effective 2021-01-01
  23. ↑Residential Tenancy Act (Prince Edward Island), 2022, c.88 · Prince Edward Island allowable annual rent increase ceiling: the Director sets the yearly increase from the 12-month average of PEI CPI to the end of June, and it shall not exceed this; the limit runs with the rental unit and not the tenant · 3% · effective 2023-01-01
  24. ↑Our convention from RTA 2006 (Ontario) ss.113, 120 and the BC Residential Tenancy Act ss.41-43, whose guidelines are CPI averages · A rent-controlled suite starts each tenant at the market rent; each 1 January the tenant's rent rises by the lesser of the market rent growth and the guideline, and it resets to the market rent when a new tenant moves in. The future guideline is the plan's inflation rate, capped where the statute caps it (Ontario 2.5%) · effective 2026-10-21