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Understand investment expenses can be claimed

Learn which costs you can deduct when earning rental, partnership, or investment income, and how to apply key rules like CCA, AIIP, and co-ownership splits

When earning income from investment properties, partnerships, or shared ventures, you are allowed to deduct reasonable expenses from that income before calculating tax. However, not all costs qualify, and some must be capitalized or spread out over time.

Understanding which expenses are eligible—and how they interact with tools like capital cost allowance (CCA) or co-ownership structures—can help reduce your taxable income while staying fully compliant with CRA rules.

Eligible Expenses for Investment and Rental Income

You may deduct reasonable expenses incurred to earn income from an investment property or business interest. These must be directly related to the operation and must not be personal or capital in nature unless amortized appropriately.

Common eligible expenses include:

  • Mortgage interest: Only the interest portion of loan payments, not principal repayment

  • Property taxes: Annual taxes levied by the municipality or local government

  • Insurance: Coverage for fire, liability, or rental property protection

  • Utilities: Electricity, water, and heating if the owner pays them

  • Repairs and maintenance: Costs to keep the property in working condition (not capital improvements)

  • Property management fees: Commissions or service charges to manage tenants

  • Office or accounting costs: Recordkeeping and tax preparation costs tied to the investment

  • Legal and filing fees: Legal services directly related to managing the income or compliance

Capital Cost Allowance (CCA)

CCA is a tax deduction that allows you to claim depreciation on eligible capital assets used to earn income—such as buildings, equipment, or furniture. You can deduct a portion of the property’s value each year based on CRA-prescribed rates.

CCA key points:

  • You can choose how much CCA to claim each year, up to the allowable maximum

  • Claiming CCA reduces your adjusted cost base (ACB) and increases future capital gains

  • You cannot create or increase a rental loss using CCA—only reduce net income to zero

  • If the property is sold for more than its depreciated value, you may have recapture to report as income

Tip: Use CCA to manage income year-over-year, especially when taxable income fluctuates. But be strategic—overclaiming early can create larger gains later when selling.

Accelerated Investment Incentive Property (AIIP)

The Accelerated Investment Incentive (AIIP) is a CRA rule that allows faster depreciation for certain capital assets acquired after November 20, 2018. AIIP temporarily boosts CCA in the year the asset is placed in service.

To qualify:

  • The asset must be new or newly acquired, not previously used or owned

  • It must be available for use in earning income

  • It qualifies for an enhanced CCA deduction in the first year, typically 1.5 times the normal amount

AIIP is especially useful for newly purchased buildings, equipment, or technology used in rental or partnership businesses.

Co-Ownership and Shared Expenses

If you co-own a rental property or income-generating asset with another person, expenses must be divided based on each person’s ownership share or capital contribution. This includes:

  • Ongoing costs like repairs, maintenance, insurance, and interest

  • Capital deductions like CCA or AIIP (each co-owner claims their own portion)

  • Any income generated from the shared property must be split in the same proportion

Important: Do not assume an automatic 50-50 split. If one owner contributed more capital, expenses and income must be reported according to the actual economic interest.

Expenses Related to Other Investment Income

If you earn interest, dividend, or partnership income, you may also claim costs tied to earning that income. These may include:

  • Safe deposit box fees (for prior tax years; now largely disallowed)

  • Investment advice or management fees

  • Legal or accounting services

  • Bank fees specifically for investment-related transactions

If you incur costs to earn capital gains, such as brokerage commissions or transaction fees, those should be included in your adjusted cost base rather than reported as current year expenses.