Rental Income for Quebec

For Quebec residents, rental income is taxable on both your federal and provincial income tax returns. You report your gross rental income and deduct your eligible expenses to determine your net rental income or loss. This amount is then included in your total income and is taxed at your marginal tax rate.

If you are a Quebec resident earning rental income, you must prepare separate statements of rental income and expenses for both the federal (CRA) and provincial (Revenu Québec) tax authorities. Each return may have slightly different reporting requirements, so ensure you complete both accurately.

Rental income is not limited to regular rent payments. It also includes fees for parking, laundry, or other services, forfeited damage deposits, and amounts received for renting a room in a home. Income from short-term accommodations, such as Airbnb or similar platforms, is considered rental income, as are any amounts received for granting, extending, or cancelling a lease.

Important Considerations

• Residency: Quebec residents must file both the federal T776 and the provincial TP-128-V.
• Personal use: When only a portion of a home is rented, only a reasonable portion of the related expenses can be deducted. The allocation should be based on a fair method, such as floor area or number of rooms.
• Rental vs. business income: If significant additional services are provided (for example, meals or cleaning), the rental income may be considered business income. In that case, the income and expenses must be reported on Form T2125 (federal) and TP-80-V (Quebec) instead of T776 and TP-128-V.
• Consistency: When a property is co-owned, all co-owners must complete their forms using consistent information.

Rental Income vs. Business Income

It is important to differentiate between rental income and business income, as each is reported on separate forms and is subject to different tax rules.

Rental Income (Income from Property)

This applies if you primarily rent out a space and provide only basic services to your tenants, such as:

• Heat and light
• Parking
• Laundry facilities

Business Income

If you offer substantial additional services—such as cleaning, security, or meals—your rental activity may be classified as a business. The more services provided, the more likely it will be treated as business income, which must be reported on Federal Form T2125 and Quebec Form TP-80-V.

What to Watch Out for When Reporting a Rental Loss

When reporting a rental loss, it is essential to follow both Canada Revenue Agency (CRA) and Revenu Québec requirements. Non-compliance may result in denied deductions, reassessments, or penalties.

Reasonable Expectation of Profit

A rental activity must have a reasonable expectation of profit. Tax authorities may review situations where rental losses are reported repeatedly over several years. Renting to relatives or friends at below-market rates may be considered a personal rather than commercial activity, which could make related expenses ineligible. Charging rent at fair market value and maintaining records to demonstrate business intent is important.

Uncollectible Rent

A deduction for uncollectible rent is permitted only if that rent was previously included in reported income. Evidence must show that the rent became uncollectible during the tax year, such as correspondence with tenants or notices from a bankruptcy trustee, demonstrating reasonable efforts to collect payment.

Personal Use of Property

When only part of a property is rented, expenses must be allocated between personal and rental use based on a reasonable method, such as square footage or number of rooms. For shared expenses—like property taxes, insurance, or utilities—only the portion related to the rented area may be claimed.

Rental Loss

If rental expenses exceed rental income, the resulting rental loss should be entered on line 136 with a minus sign (–) and subtracted from income. Note that you cannot claim the portion of the capital cost allowance (CCA) that creates or increases a rental loss.

If you are a member of a partnership, your share of the partnership’s rental income or losses is reported in box 3 of the RL-15 slip or in the partnership’s financial statements. For losses from a partnership where you are a specified member, report the amount on line 260 and complete Schedule N.

For labour costs (other than salaries and wages to employees) incurred to maintain land or to maintain, repair, or renovate a rental property, you must provide details of every person or business that carried out the work. Complete form TP-1086.R.23.12-V, Costs Incurred for Work on an Immovable, and include it with your return. Failure to provide this information may result in a penalty.

Example:

Elise Guilipse
2000 Main Street
Montreal, QC H2Z 1K7

Basement Rental: 30%

Rental Income	$12,000.00
Mortgage Interest	$8,000.00
Property Tax	$3,500.00
Utilities	$3,000.00
Insurance	$1,500.00
Cleaning Expenses	$450.00
Advertising	$150.00
Total Expenses	$16,600.00
Loss	-$4,600.00

Answer

Not all expenses are 100% deductible if only a portion of the property is used for rental purposes. Generally, expenses like mortgage interest, property tax, utilities, and insurance must be prorated based on the percentage of the home used for the rental. Other expenses, such as advertising specific to the rental unit, can typically be deducted in full.