Rent is likely the most significant monthly expense a tenant faces. And while some have no problem footing this bill, those who struggle financially become increasingly nervous as the 1st of the month approaches.
Given the high cost of rent across Canada, can renters obtain some financial relief during tax season? More specifically, can a tenant claim rent as a deduction on their tax return?
In general, the answer is “no.” Rent payments don’t qualify as a tax deduction for anyone in Canada.
However, there are a few exceptions to the rule. Depending on where a tenant resides and their specific financial situation, they can claim rent when filing their taxes.
In this article, we’ll explore these options and explain how you, as a landlord, can help your tenants get a tax break on their rent.
How a tenant can claim rent on their taxes
Canadian tenants can claim their rent in their taxes in one of two ways:
- Qualify for a tax credit related to eligible rent payments in one of three provinces: Ontario, Quebec, and Manitoba.
- Deduct rent payments as an expense if they’re self-employed and meet specific eligibility criteria.
As long as a tenant falls into one of these two categories, they’ll be able to claim rent on their tax return.
Claiming rent on a tax return in Ontario
A tenant who lives in Ontario may qualify for the Ontario Trillium Benefit (OTB). This refundable tax credit provides financial support for low-to-moderate-income households. It offers a monthly, tax-free payment to help cover a portion of their energy, property taxes, and sales tax costs.
The OTB is a bundle of the following three credits:
- Ontario Energy and Property Tax Credit (OEPTC). Offsets the cost of property taxes and sales tax on energy bills.
- Northern Ontario Energy Credit (NOEC). Offsets energy costs for Northern Ontario residents.
- Ontario Sales Tax Credit (OSTC). Offsets the cost of spending on everyday goods and services.
To qualify for the OTB, an individual must be eligible for at least one of these credits.
The OEPTC and NOEC components of the OTB consider an individual’s rent payments to determine how much they’re entitled to receive each month. So, while a tenant cannot directly claim rent payments as a tax deduction, the OTB payments are determined partly by the rent they paid.
The amount a tenant can receive from the OEPTC/NOEC is based on several factors, including rent payment size, age, household income, and marital status.
To apply for the NOEC and OEPTC, they must complete Form ON-BEN and submit it with their tax return.
OEPTC and NOEC eligibility requirements
To qualify for the OEPTC, a tenant must reside in Ontario at the beginning of the payment month in the current year. Plus, they must meet at least one of the following criteria:
- Be at least 18 years of age
- Been married or in a common-law relationship
- Living with or have lived with their child
Also, they must meet at least one of the conditions for the previous year:
- Paid rent or property tax for their principal residence
- Paid for accommodation costs for living in a public or non-profit long-term care home
- Paid for home energy costs, such as electricity and heat, for their principal residence on a reserve
- Lived in a designated Ontario university, college, private school residence
The eligibility requirements for the NOEC are the same as those for OEPTC. However, the tax credit is available only to Northern Ontario residents. In addition, a tenant may not use the criteria of living in a post-secondary institution to qualify.
The following rules apply to the OEPTC and NOEC as well:
- If a tenant lives with a partner or spouse, only one may qualify for the credit.
- If a tenant lives with roommates, they can only declare their portion of the rent when applying for the credit
- The tenant can only claim rent payments that their landlord reports on their tax return
Claiming rent on a tax return in Quebec
Tenants living in Quebec may qualify for the Solidarity Tax Credit program. This benefit provides financial assistance for low-and moderate-income families and consists of three components:
- Housing
- Quebec sales tax (QST)
- Individuals living in northern Quebec villages
A tenant may qualify for all three components or only one or two, depending on their circumstances. Naturally, the housing element of the benefit considers rent payments they made during the year.
The amount a tenant can receive from this tax credit depends on their household’s income, expenses, and location. Revenue Quebec provides a handy calculator they can use to estimate their entitlement.
To claim the Solidarity Tax Credit, an individual must complete Schedule D of their income tax return.
Solidarity Tax Credit eligibility requirements
To qualify for the Solidarity Tax Credit, an individual must meet all the following requirements:
- Be at least 18 years old
- Be a Canadian citizen
- Be a Quebec resident
Suppose the tenant was sharing accommodation with a spouse or common-law partner. In that case, only one can claim the tax credit.
Claiming rent on a tax return in Manitoba
In Manitoba, tenants may claim rent on their tax return courtesy of the Education Property Tax Credit. This credit helps to offset homeowners’ property tax costs but is also available to renters.
The Manitoba government considers rent paid during the year to determine the amount an individual is entitled to receive.
A tenant can claim 20% of their rent payments, up to a maximum allowed of $525. Seniors may be eligible for an additional amount if their household income is under $40,000.
To claim the Education Property Tax Credit, a tenant must complete and submit Form MB479 with their tax return.
Education Property Tax Credit eligibility requirements
To qualify for the Solidarity Tax Credit, an individual must:
- Be at least 16 years old
- Be a Manitoba resident
- Have paid rent or school tax on their principal residence in Manitoba
If the tenant lives with a spouse or common-law partner, only one is eligible for the credit. The same concept applies if the tenant shares the rental with roommates – only one may claim the credit.
Claiming rent against self-employment income in Canada
Self-employed tenants may deduct a portion of their rent on their tax return if they use part of the rental property for business purposes.
The amount of rent they can claim is limited to the space they use to conduct business. For example, if their office occupies 15% of the total square footage of the rental, they can only deduct 15% of their rent.
Self-employed tenants can deduct their allowable rent using Form T2125.
What if a tenant isn’t self-employed but works from home as part of their employment? In that case, they also are eligible to deduct a portion of their rent on their tax return.
Employed tenants who work from home must satisfy certain conditions to claim rent as an expense. These criteria are listed on Form T2200. The employer must fill out this document and provide it to the tenant to confirm their eligibility for the rent deduction.
What documents does a landlord need to provide for tenants to claim rent on their taxes?
To claim rent on their tax return, a tenant must obtain rent receipts from you as proof of payment. Though some tax programs don’t require them as part of the application process, it’s wise to keep them on hand should the CRA wish to review them.
A simple PDF document will suffice as a rent receipt. It should contain the following details:
- Landlord’s name and contact details
- The address of the rental property
- Dates of all the rent payments made during the year
- Dates that the tenant lived at the property
- Total rent paid during the year
- Landlord’s signature and date of signing
The process is more formal regarding the Solidarity Tax Credit. You must provide your tenant with an RL-31 slip for them to claim the credit on their tax return.
Landlords who rent out a property in Quebec are legally required to file this slip with Revenu Quebec and supply a copy to their tenants.
Our Final Thoughts
Provided they meet the criteria, a tenant can claim rent on their taxes and recover some of the money they spend on this hefty expense. You can do your part as a landlord by supplying them with detailed rent receipts.
Besides getting access to tax credits, you can also help your tenants improve their credit scores with each rent payment they make. This benefit is possible with the help of SingleKey’s Rent Collection tool.
The Rent Collection tool lets you receive rent payments from your tenants online, which SingleKey reports to credit bureaus. As a result, your tenants will have a strong incentive to pay their rent on time, as making timely payments is an excellent way to boost a credit score.
Or, to put it another way, they can use their rent payments to increase their financial freedom!
Setting up automated payments using the Rent Collection tool takes just a few minutes. And there are zero transaction fees for your first three tenants. Sign up today through our Rent Collection page and say goodbye to cheques and trips to the bank forever!
