Personal Finance

Rental income vs mortgage payment

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  • Jul 10th, 2020 5:56 pm
[OP]
Newbie
Oct 16, 2018
4 posts

Rental income vs mortgage payment

From a tax standpoint, what to do if your mortgage payment is higher than your rental income ?

Can you claim that as a loss on your taxes or something ? The property is not where I live.
16 replies
Deal Addict
Feb 22, 2007
1962 posts
225 upvotes
Mississauga
The mortgage payment is made of 2 things....Principle and Interest portion.

The only part you can use and a rental expense is the interest portion.

Typically from a tax perspective:

rent income

Less:

Interest expense
Maint fee (if applicable)
Property tax
Utilities (if applicable)
Misc repairs and Main.
Real estate fees/advertising costs etc. (to list the unit)
Moderator
User avatar
Mar 23, 2004
42940 posts
8912 upvotes
Markham
cpphey wrote: From a tax standpoint, what to do if your mortgage payment is higher than your rental income ?

Can you claim that as a loss on your taxes or something ? The property is not where I live.
For mortgage payments, you can only claim the interest portion paid against rental income.
Deal Addict
Jan 19, 2017
4093 posts
2328 upvotes
cpphey wrote: From a tax standpoint, what to do if your mortgage payment is higher than your rental income ?

Can you claim that as a loss on your taxes or something ? The property is not where I live.
Technically Yes, net rental loss can be used to offset other income to pay less tax. But if you have rental loss every year, CRA May deny your offset because you are supposed to be in rental business to make money. If you loose money all the time, then you shouldn’t in that business.
Member
Sep 27, 2004
271 posts
44 upvotes
Ottawa
ml88888888 wrote: Technically Yes, net rental loss can be used to offset other income to pay less tax. But if you have rental loss every year, CRA May deny your offset because you are supposed to be in rental business to make money. If you loose money all the time, then you shouldn’t in that business.
What are the other incomes? Do you have an example? T4? capital gain from stock market?
Deal Addict
Jan 19, 2017
4093 posts
2328 upvotes
JayJJJ wrote: What are the other incomes? Do you have an example? T4? capital gain from stock market?
T3, T5, T4A, T4RRSP, T4RRIF, T4E, T4OAS, basically all T4s.
Deal Addict
Jun 24, 2015
4525 posts
1335 upvotes
Woodbridge, ON
your mortgage payment is 2 things, interest AND principal, you can only use your rental income to pay interest not principal so you definately have to make up the diff
Hi
Sr. Member
User avatar
Jan 15, 2017
962 posts
500 upvotes
cpphey wrote: From a tax standpoint, what to do if your mortgage payment is higher than your rental income ?

Can you claim that as a loss on your taxes or something ? The property is not where I live.
If it's a rental property, in the income section on a tax return there is a line for other business income (farming, fishing etc.). Just complete an income statement for your business (rent, less expenses like mortgage interest etc.) and enter the profit/(loss) on that line. If you lost money, it reduces your taxable income.

The business version of any tax program like TurboTax should be able to create your income statement.
Deal Addict
Jun 24, 2015
4525 posts
1335 upvotes
Woodbridge, ON
Hello, question here about my 2019 income tax and RRSP. I submitted it 2 months ago thru my "Tax Guy" who is a professional chartered accountant. It Finally showed Assessed 2 days ago on the CRA web site. but my NOA is not yet available. I JUST realized the Tax Guy made a mistake and did not put the right amount for my RRSP Contribution, I have 2 sets of slips, one for 2019 and one for First 60 Days 2020, I had only one slip at the time but had the amount of the other slip the bank gave me and wrote it down and put it on the letter and gave it to my tax guy, and told him I will get the second slip its in the mail, and he still forgot to include it, I am doing HBP repayment so that amount reflects my yearly hbp repayment amount so this is why i wanted to include it, can i change it before the NOA or should i do it after?

same thing with last year he did not alocate my rrsp towards my hbp repayment as i had instructed and i found out, should i change last year (2018) then my 2019 so as my NOA reflects the true amount?
Hi
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Jun 26, 2005
9984 posts
1869 upvotes
Toronto
GoodFellaz wrote: Hello, question here about my 2019 income tax and RRSP. I submitted it 2 months ago thru my "Tax Guy" who is a professional chartered accountant. It Finally showed Assessed 2 days ago on the CRA web site. but my NOA is not yet available. I JUST realized the Tax Guy made a mistake and did not put the right amount for my RRSP Contribution, I have 2 sets of slips, one for 2019 and one for First 60 Days 2020, I had only one slip at the time but had the amount of the other slip the bank gave me and wrote it down and put it on the letter and gave it to my tax guy, and told him I will get the second slip its in the mail, and he still forgot to include it, I am doing HBP repayment so that amount reflects my yearly hbp repayment amount so this is why i wanted to include it, can i change it before the NOA or should i do it after?

same thing with last year he did not alocate my rrsp towards my hbp repayment as i had instructed and i found out, should i change last year (2018) then my 2019 so as my NOA reflects the true amount?
My guess is yes. But phone CRA and ask.
Deal Addict
May 28, 2005
2200 posts
197 upvotes
Don't bother calling CRA...I called this week, waiting 1.5 hours to speak to a rep then got disconnected. Annoyed as hell when that happens. My dad was able to get through after waiting 2 hours. He called due to an error his tax guy made on his return. All they told him was he can log into his CRA account online and make an amendment.
signature removed for rule violations - no referrals allowed
Deal Addict
Aug 28, 2010
1237 posts
312 upvotes
Toronto
I always wondered if the INTEREST portion of your mortgage + property tax + insurance and other legitimate current expenses causes a loss every month. Are you allowed the keep the rental property wrt claiming losses? There is no reasonable expectation in near future to make a profit..... i am losing money also. I am OK being negative as I hope the appreciation covers the loss and it goes against my other income.... I have proof i am charging on-par rent in my area.... expenses are all legit.... i guess we will see..
Deal Addict
Jan 19, 2017
4093 posts
2328 upvotes
porchemasi wrote: I always wondered if the INTEREST portion of your mortgage + property tax + insurance and other legitimate current expenses causes a loss every month. Are you allowed the keep the rental property wrt claiming losses? There is no reasonable expectation in near future to make a profit..... i am losing money also. I am OK being negative as I hope the appreciation covers the loss and it goes against my other income.... I have proof i am charging on-par rent in my area.... expenses are all legit.... i guess we will see..
You can keep claiming until CRA denies you.
Deal Addict
Jun 18, 2018
1329 posts
827 upvotes
Toronto
porchemasi wrote: I always wondered if the INTEREST portion of your mortgage + property tax + insurance and other legitimate current expenses causes a loss every month. Are you allowed the keep the rental property wrt claiming losses? There is no reasonable expectation in near future to make a profit..... i am losing money also. I am OK being negative as I hope the appreciation covers the loss and it goes against my other income.... I have proof i am charging on-par rent in my area.... expenses are all legit.... i guess we will see..
The important factor is what I bolded above. You're fine.
Member
Jul 6, 2019
468 posts
638 upvotes
U cant deduct entire mortgage interest, only a portion of the interest since ur renting out a portion of ur house
Sr. Member
Jan 15, 2015
622 posts
365 upvotes
cpphey wrote: From a tax standpoint, what to do if your mortgage payment is higher than your rental income ?

Can you claim that as a loss on your taxes or something ? The property is not where I live.
If you own a separate principal residence or are simply renting, your rental residence and all expenses directly attributed to the upkeep of that property are 100% deductible against other income (such as employment income) provided you have 100% ownership. If the rental residence is jointed held with a spouse or relative, you can each declare 50% of the rental gain or loss. You will need to fill out the T776 form for Rental Income and attach to your return. If you are using tax software, it is relatively painless as the forms will be included and automatically used in the final calculation of taxes.

You can claim a rental loss for several years and this should not raise eyebows with CRA demanding an audit if your loss each year is up to a few thousand dollars. You should attempt to show a decreasing loss over the years, however, as this shows that you intend to eventually make a profit from the rental.

I would not worry about a CRA audit if you can produce evidence of charging fair-market rents and bank statements showing interest paid towards your mortgage, as well as demonstrating that all expenses are genuine.

In the end, all CRA cares is collecting capital gains tax owing on your (hopefully) greatly appreciated property when you sell or pass it onto your heirs.
Sr. Member
Jan 15, 2015
622 posts
365 upvotes
porchemasi wrote: I always wondered if the INTEREST portion of your mortgage + property tax + insurance and other legitimate current expenses causes a loss every month. Are you allowed the keep the rental property wrt claiming losses? There is no reasonable expectation in near future to make a profit..... i am losing money also. I am OK being negative as I hope the appreciation covers the loss and it goes against my other income.... I have proof i am charging on-par rent in my area.... expenses are all legit.... i guess we will see..
Yes, for reasons I stated in a previous reply. I was a landlord for over 18 years and many of those years were showing net losses as I had major unexpected repairs like a roof and replacement of sewer drains. In the end, CRA collected thousands in taxes after I made a profit from the sale of my property.

CRA cannot tax you when you dispose of a capital property while simultaneously denying claims for losses incurred over the years while maintaining that property.

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