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New apartment construction in a home.

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Hi myself and my wife have put a new apartment in our home and have rented it out for the first time last year. I am wondering where I can allocate the expenses such as electrical wiring, plumbing, lumber, paint, new range, new refrigerator, new washer & dryer etc.. for our 2023 tax return. I have tried to contact the CRA but they never give me a straight answer and tell me I have to figure it out for ourselves. Any help would be greatly appreciated.

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Hello Mark Power,

You should consult an accountant to create an income statement and determine what items to expense and what items to capitalize.

FYI - 

Current expenses or capital expenses

Renovations and expenses that extend the useful life of your property or improve it beyond its original condition are usually capital expenses. However, an increase in a property's market value because of an expense is not a major factor in deciding whether the expense is capital or current



To enter information about your rental income, follow the steps below:

1. On the "Left-side menu on the Interview tab", select "Interview setup".

2.  On the page that appears to the right, go to the "Rental income" group, check the box "Rental property income" also if you paid tax by instalments. Then go to "Tax paid by instalments and tax transfer" group, check the box "Tax paid by instalments and tax transfer" and click "Next" at the bottom of the page.

3. Return to the "Left-side menu on the Interview tab", select "Rental Income".

4.  On the page that appears to your right, click on the plus sign "+" icon to the right of the line "T776 - Rental Income property".

5. Complete the first page entitled "T776 - Rental property identification". On the line for "Percentage (%) of personal use of your rental property", enter your personal use portion of the building. If you do not live in the building, leave the field blank.

(If you are the co-owner of the building with your spouse see point #11)

6. Please indicate whether you are sole proprietor or co-owner of the property, to do so, go to the "Type of ownership of the rental property" line and select the option that suits you best from the drop-down menu. Then, on the line "Percentage interest in the partnership" enters your percentage.

7. On the next page, enter your income and expenses in relation to this property.

8. If you used the services of a professional contractor to repair your building, use the sub-section "Labour costs" to enter the relevant information. Please make sure in this subsection that the amount of repair has not already been entered in the expenses beforehand: make sure to choose the appropriate option from the drop-down menu for the line "Do you wish to add these labour costs as an expense on the income statement".

9. If you want to claim depreciation for your property, click on the "CCA" sub-section and select the appropriate class, usually Class 1.

10. On the page that appears, enter the relevant information. If you do not want to claim depreciation, go to the line "Limit to the CCA" and enter "$0.00". However if you wish to claim a portion of the depreciation or any other amount, it is limited to the maximum amount of this category. Please note that you cannot claim CCA when you have a rental loss.

11. If you are the co-owner of the building with your spouse or other partner, click on the sub-section "Partners", and on the page to the right, choose your option.

12. If your spouse is a co-owner of the rental property and completed his or her tax return along with yours, there is no need to enter the information in your spouse's file, as it will be transferred by the program and form T776 will be generated. The same applies for a resident of Quebec and form TP-128 will be produced by the program. However, if your spouse wants to claim expenses different from yours, all the information will then have to be entered again separately in his or her own file. For all other business partners, they will have to enter the information in their own file.

Forms T776 (federal) and TP-128 (Quebec) will be generated by the program.

The amount of rental income will be reported on line 12599 (gross) and line 12600 (net) of the federal return and, for Quebec residents, on line 168 (gross) and line 136 (net) of the Quebec return.

For more information, please consult the CRA website at the following link:



For Quebec residents, you can consult the Revenu Québec website at the following link:



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