The whole point of filing an NR6 is to pay tax on your net rental income instead of 25% of your gross rent. But which expenses actually count? Getting this wrong means either overpaying taxes or facing CRA scrutiny.
Here's the complete breakdown of what you can deduct, what you can't, and the one category that trips up almost everyone.
Key Distinction
There are two types of deductions: those you claim on your NR6 (to reduce monthly withholding) and those you can only claim on your year-end Section 216 return. We'll cover both.
Expenses You CAN Deduct on Your NR6
These are the "current expenses" that CRA allows you to include when calculating your estimated net rental income on the NR6 form. They directly reduce your monthly withholding:
✅ Property Management & Operations
Property management fees
Fees paid to property managers (typically 8-12% of rent)
Property taxes
Municipal property taxes for the rental property
Insurance premiums
Landlord/property insurance (not content insurance for tenants)
Condo fees / Strata fees
Monthly condo corporation fees (but see note on special assessments below)
✅ Utilities (if landlord pays)
- Electricity
- Gas / Heating
- Water / Sewer
- Internet / Cable (if included in lease)
✅ Repairs & Maintenance
Routine repairs
Fixing plumbing, electrical issues, broken appliances, etc.
Landscaping & snow removal
Regular lawn care, seasonal maintenance
Cleaning between tenants
Professional cleaning costs
Pest control
Extermination services
✅ Professional Services
Accounting fees
Fees for preparing rental statements and tax returns
Legal fees (rental-related)
Lease preparation, tenant disputes, eviction proceedings
Agent fees
NR6 agent services (like ours!)
✅ Advertising & Finding Tenants
- Online listing fees (Kijiji, Rentals.ca, etc.)
- Tenant screening / credit check fees
- Finder's fees / Realtor fees for finding tenants
Expenses You CANNOT Deduct on NR6 (But CAN on Section 216)
Important: Capital Cost Allowance (CCA)
The biggest deduction most landlords miss on NR6: you cannot include CCA (depreciation) on your NR6 form. CCA is only deductible on your year-end Section 216 return. This is by design—CRA doesn't allow estimated depreciation for withholding calculations.
⚠️ Only Deductible on Section 216 (Not NR6)
Capital Cost Allowance (CCA)
Depreciation on the building and major equipment (furnace, appliances, etc.)
Capital improvements
Major renovations, new roof, new HVAC systems—these add to the property's cost base
Special assessments
One-time condo special assessments for major repairs/upgrades
Expenses You Can NEVER Deduct
❌ Not Deductible—Ever
Mortgage principal payments
Only the interest portion of your mortgage is deductible
Personal use portions
If you use the property personally at all, that portion isn't deductible
Land transfer tax / Purchase costs
These are added to your cost base, not deducted annually
Value of your own time
You can't pay yourself for managing the property
The Mortgage Interest Question
Here's where it gets interesting: mortgage interest IS deductible, but there's a catch for NR6 purposes.
Technically, you can include estimated mortgage interest on your NR6. However, many agents (and CRA reviewers) prefer to see only "day-to-day operating expenses" on the NR6 and save mortgage interest for the Section 216 return. Why?
- Mortgage interest can fluctuate (variable rates)
- It's harder to estimate accurately
- It may trigger additional CRA questions
Our recommendation: Include mortgage interest on your NR6 if it's significant (reduces your net income substantially), but be prepared to document it. If your operating expenses alone bring your net income low enough, you may choose to exclude it from the NR6 and claim the full amount on your Section 216.
Quick Reference Table
| Expense Type | On NR6? | On Section 216? |
|---|---|---|
| Property management fees | ✅ Yes | ✅ Yes |
| Property taxes | ✅ Yes | ✅ Yes |
| Insurance | ✅ Yes | ✅ Yes |
| Condo fees | ✅ Yes | ✅ Yes |
| Repairs & maintenance | ✅ Yes | ✅ Yes |
| Utilities (if landlord pays) | ✅ Yes | ✅ Yes |
| Accounting/legal fees | ✅ Yes | ✅ Yes |
| Mortgage interest | ⚠️ Usually | ✅ Yes |
| CCA (depreciation) | ❌ No | ✅ Yes |
| Capital improvements | ❌ No | ⚠️ Added to cost base |
| Mortgage principal | ❌ No | ❌ No |
Real Example: How Deductions Change Your Withholding
Let's see the difference deductions make with a real scenario:
Property: Downtown Toronto Condo
Without NR6 (25% Gross):
- Monthly rent: $2,500
- Withholding: $625/month
- Annual withholding: $7,500
With NR6 (Net Income):
- Monthly rent: $2,500
- Monthly expenses: $1,200
- Net income: $1,300
- Withholding (~25%): $325/month
- Annual withholding: $3,900
Annual savings: $3,600
Tips for Maximizing Your Deductions
- Keep receipts for everything—CRA may ask for documentation
- Estimate conservatively—underestimating expenses means a refund; overestimating means owing money
- Review last year's actuals when estimating this year's expenses
- Don't forget irregular expenses—annual insurance, property tax installments, etc.
Let Us Handle the Complexity
Tracking expenses, calculating deductions, and optimizing your NR6 takes time and expertise. Our $999 CAD flat-fee package includes complete expense analysis and NR6 preparation—plus we file your Section 216 at year-end to capture every deduction, including CCA.
Get Started
