Real Estate Tax Deductions – Implementation Checklist & Tax Planning Guide

For Alberta Real Estate Investors Working with BOMCAS Canada

Annual Tax Deduction Tracking Checklist

Mortgage Interest & Debt

•  Obtain mortgage statement showing annual interest paid (separate from principal)
•  Document that borrowed funds were used for rental property (loan agreement)
•  For mortgages covering both personal and rental property, calculate rental percentage
•  Record interest payment amounts by property (if multiple properties)
•  Keep mortgage documents supporting income-generating purpose

Property Taxes

•  Obtain property tax notice from municipality
•  Record property tax payment dates and amounts
•  For partial-year rentals, calculate prorated amount (e.g., 6 months = 50% deduction)
•  For partial-use properties, document % of property used for rental
•  Calculate deductible amount: Total property tax × % rental use
•  Keep property tax payment receipts

Property Insurance

•  Obtain insurance policy documents
•  Record annual premium amount
•  For multi-year policies, determine amount applicable to current tax year
•  Keep insurance premium invoices and payment receipts
•  For properties with multiple coverage types, allocate to rental-only coverage

Repairs & Maintenance

•  Maintain receipt/invoice file for all repair expenses
•  Document each repair with vendor name, date, amount, description
•  Distinguish current repairs (full deduction) from capital improvements (depreciated)
•  Keep vendor invoices and canceled checks/payment confirmations
•  For large repairs, obtain written quote to support reasonableness
•  Record labor costs separately from materials
•  Do NOT claim value of your own labor/sweat equity

Current maintenance examples to track:

•  Plumbing repairs
•  Painting/repainting
•  Fixture replacements
•  Lawn maintenance & landscaping
•  Cleaning/janitorial services
•  HVAC servicing
•  Appliance repairs (not replacements)

Do NOT deduct as current repairs (These are capital):

•  New roof (capital improvement)
•  New HVAC system (capital improvement)
•  Renovations/additions
•  New appliances
•  Finished basement

Condo/Property Management Fees

•  Obtain property management agreement
•  Record monthly/annual management fee amounts
•  Separate management fees from capital reserve contributions
•  For condo fees, identify deductible operating portion vs. non-deductible reserve
•  Keep all fee invoices and payment receipts
•  For partial-year services, prorate to deductible period

Utilities (If Landlord Pays)

•  Confirm landlord is responsible for utilities per lease terms
•  Obtain copies of utility bills
•  Record actual utility payments made
•  For multifamily properties, allocate utilities proportionally if partially owner-occupied
•  Keep utility bills and payment confirmations
•  Track: electricity, water, sewer, gas, garbage, etc.

Professional Fees

•  Collect invoices for accounting services
•  Collect invoices for tax preparation (Form T776)
•  Collect legal fee invoices related to rental activity
•  Document purpose of each professional service
•  For mixed personal/rental services, allocate proportionally to rental
•  Keep all professional service agreements and invoices

Types of professional fees to track:

•  Tax preparation ($300-$800)
•  Accounting/bookkeeping ($500-$1,500)
•  Legal advice – leases, disputes, evictions ($1,000-$3,000)
•  Property valuations/appraisals ($400-$800)
•  Auditor/compliance review

Advertising & Marketing

•  Track all expenses for tenant recruitment
•  Obtain invoices from online listing platforms (Kijiji, rental sites)
•  Keep newspaper advertisement receipts
•  Document realtor/tenant-finding service fees
•  Keep photography and professional photography invoices
•  Keep signage and promotional material costs
•  Only count advertising while property is available for rent

Capital Cost Allowance (CCA) Calculation

•  Determine property purchase price
•  Add closing costs (legal fees, land transfer tax where applicable)
•  Obtain property tax assessment showing land vs. building value
•  Document allocation between depreciable building and non-depreciable land
• Identify CCA class:
  •  Standard buildings = Class 1 at 4%
  •  Purpose-built residential rental (2024-2030) = Class 1 at 10%
  •  Equipment/furniture = Class 8 at 20%
•  Calculate depreciable amount (building value only)
•  Apply half-year rule for year of acquisition (50% of normal rate)
•  Track undepreciated capital cost annually
•  Keep all property purchase documents and appraisals
•  Decide CCA strategy: Claim maximum vs. defer for optimization

CCA Tracking by Year:

•  Year 1 – Depreciable value: _______ × Rate ______% × 50% = _______
•  Year 2 – Remaining UCC: _______ × Rate _____% = _______
•  Year 3 – Remaining UCC: _______ × Rate _____% = _______
•  [Continue annually]

Other Deductible Expenses

•  Bank charges on rental account
•  Interest on borrowed funds (for capital improvements)
• Travel mileage to/from rental property
  •  Track business mileage (inspection, maintenance, rent collection)
  •  Claim actual vehicle expenses or use CRA mileage rate ($0.69/km 2025)
•  Office supplies and software for rental management
•  Home office utilities (prorated to rental use percentage)
•  Salaries/wages if employing maintenance staff
•  Uncollectible rent (if previously included in income)

Form T776 Preparation Checklist

Before Completing Form

•  Gather all deduction documentation from checklist above
•  Organize receipts and invoices chronologically
•  Create summary spreadsheet of all expenses by category
•  Calculate totals for each deduction category
•  Determine if property was 100% rental or partially owner-occupied
•  For mixed-use properties, calculate percentage rental vs. personal

Completing Form T776

•  Line 1: Gross rental income – Total rent collected (before expenses)
•  Line 2: Security deposits retained – Only if kept (not returned)
• Lines 3-25: Deductible expenses
  •  Enter total amount in “Total expenses” column
  •  If mixed-use property, enter personal portion in “Personal use” column
  •  Deductible amount = Total – Personal use
•  Calculate net income = Gross income – Total deductible expenses
•  CCA section – Enter total CCA claimed (optional)
•  Final net rental income = Net income – CCA

Filing Form T776

•  Complete all required fields
•  Attach supporting documentation (T776 instruction guide available on CRA website)
•  Sign and date form
•  Include copies of key receipts/documentation
•  File by April 30 following the tax year
•  Keep copy for your records
•  For multiple properties, file separate T776 for each property

Documentation & Record-Keeping System

Recommended Organization Method

Physical or Digital File System by Category:

📁 Rental Property - [Property Address]
  📁 Annual Records
    📁 2026
      📁 Mortgage & Debt
        - Annual interest statement
        - Mortgage documents
      📁 Property Taxes
        - Property tax notice
        - Payment receipts
      📁 Insurance
        - Policy documents
        - Premium invoices
      📁 Repairs & Maintenance
        - Vendor invoices
        - Payment receipts
        - Receipts organized by date
      📁 Management & Professional Fees
        - Service agreements
        - Monthly invoices
        - Payment documentation
      📁 Utilities
        - Monthly bills
        - Payment records
      📁 Advertising
        - Marketing invoices
        - Listing receipts
      📁 Other Expenses
        - Travel logs
        - Office supplies receipts
        - Bank charges statements
      📁 CCA Documentation
        - Property purchase agreement
        - Property assessment
        - Appraisal
        - Improvement documentation

Digital Tracking Tools

•  Use spreadsheet to track all expenses by month/category
•  Use accounting software (QuickBooks, FreshBooks, Wave) for expense tracking
•  Use mobile app (CRA My Account) to track tax deadlines
•  Use document scanner to digitize receipts
•  Use cloud storage (Google Drive, Dropbox, OneDrive) for backup

Record Retention

•  Retain all documentation for minimum 6 years from filing date
•  For CCA-related documents, consider retaining indefinitely (needed for future sale)
•  Create backup copies (digital and/or hard copy)
•  Organize in chronological order for easy retrieval

Capital Gains & Disposition Planning (For Future Property Sales)

When Selling Rental Property, Calculate:

1. Capital Gain = Selling Price – Adjusted Cost Base (ACB)
   •  Selling price: $_______
   •  Original purchase price: $_______
   •  Add: Capital improvements made: $_______
   •  Add: Closing costs at purchase: $_______
   •  Subtract: Proceeds of sale expenses (realtor, legal): $_______
   •  = Adjusted Cost Base: $_______
   •  Capital Gain = Selling Price – ACB: $_______
2. Taxable Capital Gain (2026 rates)
   •  If gain ≤ $250,000: Taxable = Gain × 50%
   • If gain > $250,000:
     • First $250,000 × 50% = $_______
     • Remaining × 66.67% = $_______
   •  Total taxable capital gain: $_______
3. CCA Recapture
   •  Total CCA claimed over ownership: $_______
   • CCA recapture = Lesser of:
     • Original building cost, OR
     • Selling price of building portion
   •  Minus undepreciated capital cost remaining
   •  = CCA recapture amount: $_______
   •  (Added to income as fully taxable – not subject to 50%/66.67% inclusion rate)
4. Total Taxable Income on Sale
   •  Taxable capital gain: $_______
   •  Plus CCA recapture: $_______
   •  = Total taxable amount: $_______
   •  × Your marginal tax rate (2026): _____%
   •  = Estimated tax owing: $_______

Tax Planning for Sales

•  Time sale to split gains across two tax years if gain exceeds $250,000
•  Consider carrying forward unused losses from other years
•  Consult tax professional before sale for optimization
•  Plan for CCA recapture (can be substantial for long-held properties)

Short-Term Rental Compliance Checklist (If Applicable)

Municipal Requirements (CRITICAL)

•  Research your municipality’s short-term rental regulations
•  Confirm STR is permitted in your location/property type
•  Obtain required business license/permit
•  Obtain required STR license (if applicable)
•  Maintain proof of compliance documentation
•  Verify all requirements annually (regulations change)

Key Alberta municipalities:

•  Calgary – Check Calgary.ca for STR requirements
•  Edmonton – Check Edmonton.ca for STR requirements
•  Other municipalities – Check local municipal website

CRA Form T776 Reporting

•  Clearly identify property as short-term vs. long-term rental
•  Document rental income and days rented
•  Document rental expenses
•  For non-compliant STRs: CRA denies ALL expense deductions

Compliance = Full deductions
Non-compliance = No deductions, pay tax on gross income

Tax Planning Strategies for 2026

CCA Optimization Strategy

•  Assess current and future rental income
•  Determine if claiming maximum CCA benefits you this year
•  Consider deferring CCA to higher-income years
•  Plan multi-year CCA strategy for portfolio of properties
•  Understand CCA recapture timing for future sales

Capital Gains Planning

•  If planning property sale generating >$250,000 gain, consider timing
•  Could split gain across two years to avoid 66.67% inclusion rate on portion
•  Calculate potential tax savings from timing strategy
•  Work with tax professional on implementation

Quarterly Tax Planning

•  Each quarter, estimate annual rental income and expenses
•  Assess whether you’ll be able to claim CCA or should defer
•  Identify expense deductions you might be missing
•  Plan for quarterly tax payments if required (rental income only, no withholding)

Working With a Tax Professional

Information to Provide Your Accountant

•  Summary of all rental properties (address, purchase date, price)
• For each property:
  •  Annual rental income collected
  •  All expense documentation organized by category
  •  Property tax assessment (for CCA)
  •  Any capital improvements made
  •  Mortgage details (for interest deduction)
  •  Property management information

Questions to Ask Your Accountant

•  Should I claim maximum CCA this year or defer?
•  Are there deductions I’m missing?
•  Is there a more tax-efficient way to structure my rentals?
•  How should I prepare for potential property sales?
•  What documentation do I need to maintain?
•  Are there any red flags in my tax return that might trigger audit?

Benefits of Professional Help

•  Ensures compliance and proper documentation
•  Identifies deductions you might miss (worth $3,000-$8,000+ annually)
•  Provides audit defense documentation
•  Plans CCA and capital gains strategy
•  Optimizes multi-property portfolios
•  Keeps you updated on regulatory changes (like 2026 capital gains rates)

Typical cost: $1,500-$3,000/year
Typical benefit: $4,000-$15,000+ in tax savings and risk reduction

BOMCAS Canada Services

For assistance with:

• Tax deduction analysis and documentation
• Form T776 preparation and CRA compliance
• CCA calculations and depreciation strategies
• Capital gains planning for property sales
• Short-term rental tax compliance
• Multi-property portfolio optimization

Contact BOMCAS Canada:

• Email: info@bomcas.ca
• Phone: 780-667-5250
• Website: https://bomcas.ca
• Location: Sherwood Park, Alberta

Checklist Version: 1.0 (2026)
Last Updated: December 2025