Rental Income Tax in Quebec on Top of a Salary

You rent out a room, the basement of your house or a small apartment, and you already hold a full-time job. The rent that comes in every month is not pocket money: it is added to your taxable income and taxed at the highest rate you already pay. Here is what you report, what you can deduct, and what is actually left.

Rent you collect is taxable income

There is no tolerance threshold, no amount too small to count. The Canada Revenue Agency states that all income you receive from an accommodation sharing arrangement is subject to income tax. A twelve-month lease or three weekends on a platform: same rule.

One distinction still matters, because it changes the form you file. If you rent space and provide only basic services — heat, utilities, parking, laundry facilities — the CRA treats your income as rental income from property. If you add meals, security or cleaning, it can tip over into business income, the kind a self-employed person earns. The more services you offer, the more likely that shift becomes.

For the vast majority of salaried homeowners who rent out a room or an apartment, it is the first box: rental income.

What gets taxed is the net, not the rent

You do not pay tax on the rent you collect, but on what is left of it once you subtract the expenses you incurred to earn that income.

Federally, two lines of the return each carry a different figure. Gross rent, the total of the rents you received, goes on line 12599. Net income, after expenses, goes on line 12600. The calculation that leads from one to the other is done on Form T776, which you file with your return. If expenses exceed rents, the amount is entered in brackets: that is a rental loss.

On the Quebec side, the same net income is added to your total income on the provincial return, with its own detail form. Both returns start from the same calculation.

The expenses you can deduct

The CRA rule fits in one sentence: you can deduct any reasonable expense you incur to earn rental income. The list on the form is long: advertising, insurance, interest and bank charges, office expenses, professional fees, management and administration fees, repairs and maintenance, salaries, property taxes, travel, utilities.

The case that comes up most often is the mortgage. Interest paid on money borrowed to buy or improve the rented property is deductible. Watch out for diverted financing, though: if part of the loan was used for personal purposes, the matching interest is not deductible.

The expenses you cannot deduct

The CRA also publishes the list of what does not qualify. Four entries surprise people regularly.

That last line deserves a section of its own, because it decides almost everything when you rent out part of your own home.

Renting out a room: everything is prorated

When you rent out only part of the building you live in, the expenses that cover the whole building are not deductible in full. You have to divide them between your personal part and the rented area. The CRA accepts two splitting keys: the rented area in square metres, or the number of rooms you rent out.

The form is built for this. You enter the full amount of each expense, then the personal portion in a separate column. The total of that column goes on line 9949, and that total is not deductible.

An illustration in round numbers. You rent out 2 rooms out of 8 in your house, which is 25% of the home. Property taxes, insurance and electricity are then deductible up to 25%. A repair made only inside the rented room, on the other hand, is deductible at 100%.

Rent stacks on top of salary, at your marginal rate

This is what many salaried landlords discover when their notice of assessment arrives. Net rental income is not taxed separately, nor at a reduced rate: it is added on top of your salary. So it is taxed at your marginal rate, meaning the rate that hits the next dollar you earn, not the average across all your income. If the distinction is unfamiliar, it is worth a detour.

Take a $65,000 salary in Quebec. Here is what the pay cheque already holds back, before the first rent cheque.

At that income level, you are in the 20.5% federal bracket for 2026 and in the 19% Quebec bracket. The federal government does not take the whole 20.5%, however. Quebec residents get a 16.5% abatement: a reduction of federal tax, which exists because Quebec collects part of the income tax itself. The federal tax that actually hits the next dollar therefore drops to roughly 17.1%.

Add the two together: about 17.1% federal and 19% provincial, which is a combined marginal rate of roughly 36%.

In practice, a room rented at $600 a month brings in $7,200 of net income over the year. About $2,600 goes to tax, and you are left with around $4,600. Run the numbers on your own salary in the Quebec calculator: the marginal rate it shows is the one that will apply to your rent.

The CCA trap on your principal residence

One tempting expense remains: capital cost allowance, or CCA, which spreads the cost of the building over several years. On a purely rental property, it is an option worth weighing. On part of the house you live in, it is a trap.

When part of your principal residence is used for rental, the CRA normally considers that a change in use has occurred, which can make the gain attributable to that part taxable when you sell. The capital gains guide provides, however, that there is no change in use if three conditions are met at the same time:

• the income producing use is ancillary to the main use of the property as a residence;
• there is no structural change to the property;
• no capital cost allowance is claimed on the property.

The third one is the expensive one. Claiming CCA on the room you rent out drops the protection for that part of the home: this year's tax saving may well be paid back when you sell. The same mechanism applies to a home office, which we covered in a dedicated article.

In practice, for an employee who rents out space

• Set aside about a third of the net rent as soon as it comes in. That is the order of magnitude of the tax to come, and nothing is withheld at source on it.
• Separate expenses from the start: on one side what touches the rented space only, on the other what touches the whole building. The split will already be done when you fill in the form.
• Keep the receipts. An undocumented expense is an expense you will not deduct.
• Do not confuse rent with income. The figure that counts is the net after expenses, not the sum of the cheques you received.
• Before claiming CCA on part of your residence, weigh today's saving against the tax you may owe when you sell.