Many of the concepts used in preparing the T2125 Statement of business and professional income also apply to the T776 Statement of real estate rentals. Please first review the Business Statements (T2125) help topic.
- Complete the Identification section of the T776, including the fiscal period and account numbers.
- Indicate whether ownership of the rental properties is shared and how it's shared:
- Select the ownership share type—co-owner or partner—in order to calculate expenses and net income (see "Co-owner or partner," below):
- If the spouse is a partner or co-owner, check the box to share the rental statement and/or share motor vehicle expenses.
- In the Income section, complete one line for each property, entering the address and the income. (Alternately, you can create separate T776 statements for each property.)
- Complete the Expenses section.
- If a portion of the expenses apply to personal use, enter a percentage at the top of the Personal portion column and then answer Yes or No in the Apply column on the right to apply the proration to a specific expense line.
- To prepare rental statement for a property outside of Canada, see "Foreign rental properties," below.
Co-owner or partner?
Amounts are claimed differently depending on whether the taxpayer is a co-owner or a partner.
For example, for co-owners, the CCA for each owner must be entered separately, whereas in a partnership, each partner’s portion of the CCA is calculated based on the partnership share.
To help you choose the right type for your client, here’s what the CRA says:
“Most of the time, if you own the rental property with one or more persons, we consider you to be a co-owner. For example, if you own a rental property with your spouse or common-law partner, you are a co-owner.
In some cases, if you are a co-owner, you have to determine if a partnership exists. A partnership is a relationship between two or more people carrying on a business, with or without a written agreement, to make a profit. If there is no business in common, there is no partnership. That is, co-ownership of a rental property as an investment does not in itself constitute a partnership.”
From the CRA T4036 Rental Income Guide.
Capital Cost Allowance (CCA)
- CCA tables are not shared between spouses with co-owned T776 statements. You must divide the amounts in half and enter them on a T776Asset for each spouse. This is because co-owners' income is split BEFORE the CCA is deducted. Whereas in a partnership, CCA is deducted from the total income and then the net income is split between partners.
- CCA cannot create a loss on a rental statement. Depreciation is take only to reduce income to zero.
Learn how to claim capital cost allowance in the CCA and Assets help topic.
Foreign rental properties
If the taxpayer owns rental property outside Canada, here’s how to claim any foreign income and tax:
- On the T776, complete the Property outside Canada section, entering the currency, exchange rate, foreign tax paid and the country name.
- Enter the foreign address for the property.
- The Province list includes US states.
- To enter a foreign Postal code, press Ctrl+F2 to override the format.
- Select the Country.
- In the Foreign column, enter rents and expenses in the foreign currency. TaxCycle automatically converts them to Canadian dollars.