Line 12600 on Tax Return -
"Reporting Rental Income"

As a responsible citizen, it is essential to fulfill our tax obligations accurately. If a taxpayer own a rental property in Canada, reporting rental income on their tax return is a crucial step. 

What is Line 12600 on Income Tax Return?

Line 12600 is a section on the T1 General Income Tax and Benefit Return, Canada’s individual income tax form. This line is used to report the total rental income received from all your rental properties during the tax year.

Rental income includes any amounts a taxpayer earned from leasing or renting out real estate including houses, apartments, condos, or commercial properties.

How to Report Rental Income Correctly:

Reporting rental income accurately is crucial to avoid potential issues with CRA and to ensure compliance with tax laws. Here’s a step-by-step guide on how to report rental income on Line 12600:

• Gather Rental Income Records :

Begin by gathering all relevant documents, such as rental agreements, receipts, and records of rental income and expenses incurred during the year.

• Calculate Gross Rental Income :

Add up the total rental income received from all taxpayer’s properties throughout tax year including rental payments from tenants, advance rent or any other form of compensation related to use of their property.

• Deduct Allowable Expenses :

To determine taxable rental income, taxpayer should deduct their eligible expenses from gross rental income. Allowable expenses may include property taxes, mortgage interest, insurance, repairs, maintenance, and utilities related to the rental property.

• Report Net Rental Income :

After deducting allowable expenses, taxpayer will arrive at their net rental income. Then enter this amount on Line 12600 of tax return.

• Include Supporting Documentation :

Ensure you keep all relevant documents, such as receipts and records of expenses, as the CRA may request them for verification purposes.

Key Points for Rental Income Reporting:

• Principal Residence Exemption :

If a portion of taxpayer’s property is used as their primary residence, they may be eligible for principal residence exemption which allows them to exclude a portion of capital gain from sale of property from taxation. However rental income earned from part of property used for rental purposes must still be reported.

• Rental Losses :

If taxpayer’s total expenses exceed their rental income resulting in a rental loss, they may be able to apply this loss against other sources of income, reducing taxpayer’s overall tax liability. Properly report these losses on tax return.

– Remember to maintain proper documentation and seek professional advice from income tax accountant if you encounter complex tax situations.