Capital expenditures are expenses incurred to acquire property, improve property or make an addition to property. In general, such expenditures are not deductible in the calculation of rental income and must be added to the capital cost of the property.

Non deductible expenditures

The following expenditures may not be deducted as operating expenses:

• the acquisition cost of a rental property
• legal and engineering fees, and other expenses related to the purchase of the property (transfer taxes, relocation costs, etc.)
• the purchase price of items rented out with the property (such as the stove, refrigerator or furniture in a furnished apartment) and replacements 
• the cost of adding a fireplace 
• the cost of adding a garage

Deductible expenditures

You can deduct certain capital expenditures in the calculation of your income for the year in which they were incurred, rather than adding them to the cost of the building.

Eligible renovation or alteration expenses to improve access to a building

You can deduct any amount paid in the year for renovations or alterations to a building that you use mainly to earn income if the renovations or alterations are made to:

• meet the needs of persons with disabilities or
• help people with mobility impairments to access or move around the building

Alterations to meet the needs of persons with disabilities

You can deduct certain expenditures to a building to meet the needs of persons with disabilities, such as purchasing or installing the following:

• position indicators for elevators, such as sound signals or braille panels
• visual fire alarms
• phone devices designed for deaf persons

Alterations to help people with mobility impairments

You can deduct certain expenditures incurred for a building, for renovations to adapt it to the needs of persons with mobility impairments, such as the following:

• installing manually controlled devices for opening doors
• installing ramps inside and outside a building
• making a bathroom, elevator or door wheelchair-accessible

How to report eligible expenditures

If your expenses are for renovations or alterations made to meet the needs of people with mobility impairments, you must first complete the Eligibility Certificate for Renovation or Alteration Expenses (TP-157-V) and keep it for audit purposes.

In all cases, you must include the amounts for renovations or alterations on:

• line 126 of form CO-17.A.1, Revenu net fiscal (see courtesy translation CO-17.A.1-T) and line 214 of Income and Expenses Respecting the Rental of Immovable Property (TP-128-V), if you're a corporation or
• line 214 of Business or Professional Income and Expenses (TP-80-V) and line 214 of Income and Expenses Respecting the Rental of Immovable Property (TP-128-V), if you're an individual

For more information, see Business and Professional Income (IN-155-V) and Individuals and Rental Income (IN-100-V).