Definition
A rental loss occurs when the deductible expenses of a rental property (interest, taxes, insurance, repairs, management) exceed gross rental income.
Example: duplex purchased in 2023 in Montreal - Annual rental income: $24,000 - Mortgage interest: $18,000 - Property taxes: $4,000 - Insurance: $1,500 - Repairs: $2,000 - **Total expenses**: $25,500 - **Rental loss**: $1,500
This $1,500 loss is deductible from employment income or other income of the taxpayer, reducing tax payable.
Limitations: - CCA cannot create or worsen a loss (CCA rule limited to net income) - Rental losses cannot be created artificially for abusive tax planning purposes (Tax Court jurisprudence) - A chronic loss with no hope of profit can be challenged by CRA (reasonable expectation of profit)