Long-term rental property runs on different bookkeeping logic than a short-term rental or a typical small business — starting with how a mortgage payment actually gets recorded.

If you're managing properties for other owners rather than holding your own, see our guide for property managers instead. Guide for Property Managers

Rental Income Is Recorded When Earned, Not Just When Deposited

Record rent as revenue for the period it covers. If you own more than one property, track income separately by property — a single blended rental income account makes it impossible to know which property is actually performing.

Your Mortgage Payment Isn't One Number in Your Books

A mortgage payment is really two different things: principal repayment, which isn't deductible because it's simply paying down a debt, and interest, which is a deductible rental expense. Lumping the whole payment into one expense account overstates your deductible costs and misrepresents your actual equity position in the property.

CCA on the Building — Worth Thinking Through Before You Claim It

Capital Cost Allowance lets you deduct a portion of the building's value — not the land — each year. But CCA on a rental property can only reduce rental income to zero; it can't create or increase a rental loss. It also lowers your building's undepreciated capital cost, which can trigger recapture — added back as income — when you eventually sell. (That's a different number from your adjusted cost base, which stays at what you paid plus any capital improvements, and is what determines your capital gain or loss on sale instead.) Whether to claim CCA at all is a real strategic decision, not an automatic checkbox, especially if a sale is somewhere on your horizon.

Repairs vs. Capital Improvements: Different Tax Treatment

A repair that restores something to its original condition — fixing a leaking faucet, patching a wall, replacing a worn roof with similar materials — is a current expense, deducted in full the year you pay for it. An improvement that makes something better than it was, or extends its useful life significantly — a renovated kitchen, or a roof upgraded to higher-grade materials — is a capital expenditure, added to the building's cost and deducted gradually through CCA instead. The line isn't always obvious: the CRA has treated the same type of expense, like a roof, as current in one case and capital in another, depending on whether the work restored the property or improved on it. Miscategorizing a capital improvement as a repair is one of the most common, and most scrutinized, mistakes in rental property bookkeeping.

What You Can Deduct

• Mortgage interest (not principal)
• Property tax and property insurance
• Repairs and maintenance (current expenses only)
• Property management fees
• Utilities, if you pay them rather than the tenant
• Legal and accounting fees related to the rental

FAQ

Do I need a separate bank account for each rental property? Not legally required, but it makes tracking income and expenses per property dramatically easier, especially once you own more than one. Highly recommended even where it isn't mandatory.

Is landlord insurance treated any differently than regular property insurance? No — landlord or rental property insurance is a deductible expense, the same as any other cost of operating the rental.

What happens if I claim CCA and then sell the property? Claiming CCA lowers your building's undepreciated capital cost. If your sale price exceeds that reduced value, some or all of the CCA you claimed can be recaptured — added back as income in the year of sale. That's exactly why the decision to claim CCA is worth planning around, not defaulting into. 

Some investors also weigh holding property personally versus through a corporation — a separate decision worth understanding. holding property personally versus through a corporation

Principal vs. interest, repairs vs. capital, CCA timing — Margot walks through the distinctions that actually move your numbers. Ask Margot a question right now.