Rental income and taxes: What’s new for Canadian property owners in 2025 + MORE Apr 14th

Canadian personal T1 tax returns are generally due by April 30. There are a couple of extensions that apply every year, but there are also a few specifically for this spring 2025 tax season.

Trust tax returns

T3 trust tax returns are normally due by March 31. This includes tax returns for living trusts (also known as inter vivos trusts) set up during a trustee’s life, as well as testamentary trusts established in the will of a deceased person. March 31 is also usually the filing deadline for Canadians who hold mutual funds and exchange-traded funds (ETFs) in taxable investment accounts.

However, in February, the Canada Revenue Agency (CRA) noted:

“as a result of the change to the effective date of the proposed capital gains inclusion rate increase, the information to be reported on certain tax slips—primarily the T3, T4PS, and T5008 (book value)—needs to be recalculated to ensure taxpayers receive accurate information.”

The federal government’s early-2025 pivot to not enforce the proposed capital gains inclusion rate increase until January 1, 2026, at the earliest has led to delays this tax season…

Canadians love their real estate and they love renting their properties to make some extra money. However, that comes with some tax audit risk and the need to stay in the know of current tax law. Here’s what you should be thinking about for your 2024 and 2025 income taxes, as well as the forms you may need.

What do you claim? Rental income or business income?

When you earn income from the rental of a home, apartment, condo or other property, you will report both gross and net income on the T1 tax return using Form T776 (Statement of Real Estate Rentals). But, sometimes the T2125 (Statement of Business Income and Expenses) can be used if you are considered to be “in business” as opposed to owning an asset from which you derive “income from property.”

Which one should you claim? It’s a fine line.

In general, though, the more services provided (board and lodging, security and cleaning services, and so on), the more likely it is that you’re in “business.” Alternatively, if you provide only basic services like heat, light, parking and laundry facilities, you’re reporting rental income rather than business income…