1 Essential Financial Services Story for Advisors

In today's fast-moving financial services landscape, staying ahead means knowing what's moving in Canadian print media. According to Press Monitor's media monitoring of Canadian publications, a key story on rental income and capital gains is making waves. Here's what advisors need to know.

1. Rental Income and the Principal Residence Exemption

National Post reports that homeowners renting out parts of their homes can claim deductions on expenses such as mortgage interest, property taxes, insurance and maintenance, according to Jamie Golombek of CIBC Private Wealth, but the principal residence exemption to capital gains only applies if the rental use is secondary to the main use and no major structural changes were made. Lauren van den Berg of Mortgage Professionals Canada cautions that being a landlord brings vacancies, tenant issues and added costs, and that rental income should be part of a realistic mortgage plan rather than a way to justify an unaffordable mortgage. One homeowner, who has rented out her basement since September 2023, says the extra income gave her financial security to start a family as a single mother by choice.

Why it matters: For homeowners considering renting out part of their property, the tax implications are significant. The principal residence exemption can be lost if conditions aren't met, potentially triggering a large capital gains bill.

Key detail: Jamie Golombek of CIBC Private Wealth explains that deductions on mortgage interest, property taxes, insurance, and maintenance are available, but the exemption only applies if rental use is secondary to the main use and no major structural changes are made. Lauren van den Berg of Mortgage Professionals Canada warns that being a landlord brings vacancies, tenant issues, and added costs—rental income should support a realistic mortgage plan, not justify an unaffordable one.

Source: National Post, Financial Post Magazine

Next step: Advisors should review client property situations to ensure compliance and optimize tax outcomes. Consider whether clients are at risk of losing the exemption and plan accordingly.

Closing: What's your take on rental income strategies? Share your thoughts below.