How We Help Landlords Minimize Their Rental Tax Liability

At Royal York Property Management, we work with over 25,000 property owners across Canada, and we know that taxes are one of the biggest concerns landlords face. You want to stay compliant, but you also want to keep more of your rental income. That’s why tax planning needs to be part of your overall property management strategy, not something you think about once a year when filing your return.

Rental income is taxable, but with proactive planning, landlords can reduce what they owe. We've seen firsthand how smart planning can significantly improve your bottom line.

In this article, I’ll walk you through how we help landlords minimize their tax liability step by step, and how you can use these strategies whether you’re managing a single unit or a multi-property portfolio.

We Start With Clear Reporting of Rental Income  

The first step is understanding what needs to be reported. As a landlord, you’re required to report gross rental income, which includes not just rent payments but also fees for things like parking, late payments, laundry services, or any reimbursements from tenants.

Where many landlords make mistakes is by failing to distinguish between gross income and net income. Gross income is the total amount collected, while net income is what’s left after subtracting eligible expenses. If you want to reduce your tax liability, you need to track every eligible expense accurately and in real time.

That’s where our landlord portal makes a difference. It keeps all of your income, expenses, and maintenance records in one place, making tax filing easier and more accurate.

We Maximize Your Eligible Deductions  

We regularly advise landlords on the deductions available to them. Most know they can write off mortgage interest, property taxes, and insurance, but that’s just the start. You can also deduct expenses related to maintenance, advertising, legal and accounting fees, utilities if you pay them, and travel costs related to property visits or management.

Where we really see money left on the table is with overlooked deductions, such as professional fees, cleaning services, pest control, and even interest on loans used for property improvements.

Through our maintenance services, we make sure every repair and upgrade is logged, categorized, and documented. That means you don’t have to scramble for receipts or miss out on deductions at tax time.

We Help You Apply Capital Cost Allowance Properly  

In Canada, you can claim depreciation on your rental property through the Capital Cost Allowance (CCA). This allows you to deduct the cost of the building over time, not the land, just the structure. Most residential rental properties fall under Class 1 or 3, which depreciate at 4% and 5% respectively, on a declining balance basis.

We don’t automatically advise all landlords to take CCA. There are consequences. If you claim depreciation and later sell the property at a profit, you could be hit with recapture tax, which means paying tax on the depreciation you previously claimed. That’s why it’s important to consult a tax professional and have a long-term plan.

Our accounting partners and internal team work with landlords to determine whether claiming CCA makes financial sense, especially if they’re planning to sell or refinance in the near future.

We Make a Clear Distinction Between Repairs and Capital Improvements  

This is one of the most misunderstood parts of rental tax law. Repairs are immediately deductible; capital improvements are not. If you repaint a room, fix a broken light fixture, or patch a roof leak, you can usually deduct the expense in the same year. But if you remodel a kitchen, install new windows, or replace the roof entirely, those costs must be added to the building’s adjusted cost base and depreciated over time.

We help landlords navigate this by maintaining a complete record of every service request and invoice through our maintenance tracking system. When it’s time to file, you’ll know which expenses are deductible now and which must be depreciated over the years.

This kind of detail matters. Misclassifying a capital improvement as a repair can trigger an audit. Failing to claim a valid repair as a deduction means you’re overpaying.

We Simplify Record-Keeping to Protect Your Deductions  

The CRA requires landlords to keep detailed records of their rental income and expenses for at least six years. That includes lease agreements, receipts, invoices, bank statements, tax filings, and more. Poor record-keeping is one of the fastest ways to lose out on eligible deductions, or worse, face penalties.

Our platform keeps everything centralized. You can log in to your owner portal at any time and access your documents. This helps landlords stay organized and prepared for anything, including audits or reviews.

We also generate annual statements that clearly outline income and expense categories, so you can file with confidence or hand it off to your accountant.

We Advise on Ownership Structure and Income Splitting  

How you own your rental property affects your tax obligations. Some landlords hold property as individuals; others use corporations, partnerships, or trusts. There’s no one-size-fits-all answer, but different structures offer different benefits.

If you own property with your spouse or another family member, income splitting may be an option. Allocating a share of the rental income to a lower-income individual can reduce your overall tax bill. But this needs to be structured correctly, ideally at the time of purchase, and documented properly.

We guide landlords through these decisions and connect them with legal and financial experts when needed. Whether you’re considering setting up a corporation or entering a partnership, we make sure your structure supports your tax and investment goals.

We Help Navigate Short-Term Rentals and Shared Properties  

If you rent out your property through platforms like Airbnb or Vrbo, or if you only rent a portion of your home, the tax rules get more complex.

Short-term rental income is fully taxable. In many provinces, it also triggers specific municipal tax obligations, such as accommodation taxes. You may also be subject to different GST or HST rules, depending on how much you earn.

If you’re renting part of your primary residence, you can only claim a portion of your expenses, based on the size of the rented space and how long it was rented. Claiming personal-use expenses as rental deductions is a common audit trigger.

At Royal York, we help landlords understand what’s allowable and what’s not. Our leasing services focus on long-term, fully compliant rentals, which often lead to more consistent income and fewer complications at tax time.

We Plan Ahead for Capital Gains  

When you sell a rental property, you may face a significant capital gains tax. The gain is calculated as the selling price minus the adjusted cost base, which includes the purchase price, capital improvements, and selling costs. Fifty percent of the gain is taxable.

We help landlords plan for this in advance. If you're selling, timing matters. Selling in a year when your other income is lower can reduce the total tax you owe. Keeping detailed records of improvements also helps increase your cost base, which reduces the taxable gain.

We don’t offer tax shelters or gimmicks, but we do ensure you’re not paying more than you need to when it’s time to cash out.

We Know When to Bring in Professionals  

Managing rental tax obligations is part of what we do every day, but there are times when it makes sense to bring in outside help, especially if you’re dealing with multiple properties, changing ownership structures, or preparing to sell.

Through our network of professionals, we connect landlords with licensed tax advisors, accountants, and real estate lawyers who specialize in Canadian rental property law.

Good advice can save thousands of dollars and prevent long-term headaches. That’s why we believe in being proactive, not reactive.

Final Thoughts  

Minimizing rental tax liability isn’t about cutting corners. It’s about knowing the rules, staying organized, and making smart, forward-thinking decisions.

At Royal York Property Management, we don’t wait for tax season to start thinking about your taxes. We manage your property in a way that protects your income year-round.

Whether it’s tracking every maintenance expense, helping you determine whether to claim depreciation, or organizing your records for filing, we’re here to help.

If you want your property to work for you, not the other way around, get in touch with us. We’ll help you keep more of what you earn.