The CRA expects all taxpayers with rental income and expenses to declare them using form T776, also known as the Statement of Real Estate Rentals. Here's what you need to know.
What is the T776?
The Statement of Real Estate Rentals allows you to declare rental income and expenses. If you own and rent real estate, or other property such as farmland, you need form T776 to calculate your gross income, deductible expenses, and total net income or loss. T776 only applies to income from a property where you rent space and provide basic services, such as heat, parking, lighting, and laundry. If you also provide meals, cleaning, and security to your tenants, your income may qualify as business income, which you need to declare using T2125.
You may also be in a partnership if the rental property is co-owned by you and another person, business, or partnership. The CRA will determine if your income is from rental property or business based on the services you provide. You can also use the T4036 Rental Income guide to help you complete your T776 tax slip. The form has various parts as follows:
Part 1 – Identification
This part is where you enter your name, address, city, and the fiscal period. If this is the final year you will be receiving rental income, check the box that says "Yes." Other entries in this part include your percentage of the partnership, name and address of the person preparing the form (if prepared by another person), tax shelter identification number, and your business number, if appropriate.
Part 2 – Details of co-owners and partners
If the rental property is co-owned by you and another person, you should complete this section. There are three boxes where you enter the co-owner or partner's name and address, the net income (or loss), and ownership percentage. You can include up to three partners.
Part 3 – Income
This is the section where you enter income from the rental property. You can use the accrual method or cash method to calculate your income. The section allows you to list each rental property, the number of units and gross rent. It also has three different lines (8141, 8230 and 8299). Line 8141 is where you enter the total gross rent, while 8230 is for other income like premiums, sharecropping and leases. Line 8299 is the total gross rental income (8141 plus 8230).
Part 4 – Expenses
In this section, you can declare any expenses you've incurred to generate the rental income. This includes advertising, interest and bank charges, insurance, office expenses, management and administration fees, professional fees, repairs and maintenance, salaries, wages and benefits, travel, property taxes, utilities, motor vehicle expenses and others. You can also enter the total for the personal portion if part of the property is for your own use (other than generating income). Enter this amount on line 9369. The expense section allows you to calculate the total deductible expenses required to determine the net rental income (or loss). You can also calculate the share of income given to co-owners, recaptured capital cost allowance and terminal loss.
T776 has six more "Areas" starting from A through to F as follows:
Area A - Calculation of CCA (capital cost allowance) claim,
Are B - Equipment additions during the year
Are C - Building additions during the year
Are B - Equipment dispositions during the year
Are B – Building dispositions during the year
Are B - Land additions and dispositions during the year
Who Should Fill Out a T776?
Form T776 is meant for any taxpayer that receives income from a rental property. If you own a real estate property and generate rental income, the CRA expects you to declare this income in T776. You should complete this form if you provide rental space, as well as optional services like lighting, heat, and laundry. If you also offer meals, security and cleaning services, your income may qualify as business income, which requires a separate form. Property owners and co-owners must complete form T776 for each fiscal year. You can also have someone else prepare the slip on your behalf. If you are in a partnership or a co-owner, make sure you fill section 2 of the form.
What Expenses Can I Deduct on The T776 Form?
T776 is the designated slip for your real estate rental income and expenses. The CRA allows taxpayers filing this form to deduct various expenses as follows:
Advertising
Interest and bank charges
Insurance
Office expenses
Management and administration fees
Professional fees
Repairs and maintenance
Property taxes
Salaries, wages and benefits
Travel
Utilities
Motor vehicle expenses
Where Do I Submit a T776?
Form T776 should be submitted for each fiscal year, starting from January 1 to December 31 unless you have a unique year based on the time you rented the property. The tax slip is available on CRA official website for online filling or created by your tax software. You can also download a fillable form, complete the necessary fields and mail it to the appropriate tax centers. The CRA recommends online filling, which is convenient and easy to achieve. However, if you need more time to understand the form before filling, you can download and complete it manually. Alternatively, you can find a tax service like SimpleTax to help you fill and submit the form.
