Reconcile the income before reviewing expenses
Keep leases, rent records and property-manager statements together. Reconcile tenant payments and adjustments to the property schedule. A manager may deduct fees or repairs before paying the owner, so the deposit is not automatically the gross rental income.
Identify each property and any personal use, ownership change or vacancy. Retain the history of acquisition and improvements, even if a return was prepared elsewhere in earlier years. Those records can become important when the property changes use or is sold.
Worked example: a preliminary property result
A hypothetical Ottawa rental produces $39,600 of gross rent and has $13,200 of supported operating costs provisionally identified for review. The preliminary difference is $26,400 before capital-cost decisions and other adjustments. A further $9,000 of mortgage principal paid is kept outside that operating-cost figure.
The owner also paid $1,250 for a routine repair and $17,000 for a substantial addition. The invoices and work descriptions are reviewed under CRA’s current-versus-capital guidance. This example does not assume the addition is immediately deductible or calculate a final tax balance.
Keep the evidence behind allocations
For mixed-use property or costs shared across properties, document the allocation method and facts supporting it. Do not select a percentage simply because it was used in last year’s spreadsheet. A changed use or ownership arrangement may require a fresh assessment.
Interest and principal need the lender’s breakdown. Insurance or other advance payments may cover more than the current period. The preparation file should explain those distinctions and retain the original documents rather than only the summary entered in software.
Complete a property-level year-end checklist
Gather gross rent, expense invoices, financing, ownership documents, additions, dispositions and any personal-use or rental-format changes. Compare the current schedule with the prior return and identify missing costs or unexplained large differences. Confirm who will prepare the actual return.
If the rental is short-term, owned by a non-resident or held through a corporation, additional rules may apply. Raise those facts at intake. An organized schedule supports the appropriate review; it does not replace the tax decisions about classification, capital cost allowance or a change in use.
Put this into practice
Sources and current guidance
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