What Canadian homeowners can claim on their taxes in 2025

By: Arshi Hossain on February 11, 2025

This article has been updated from a previous version.

As a new homeowner, understanding the nuances of homeownership and its relationship to taxes can feel like a tricky - not to mention, costly - area to step into. However, you may be glad to know that at least a few of those expenses can soften your tax bill, from your mortgage insurance to home insurance, and even a portion of your home,

Mortgage insurance

Mortgage insurance is designed to financially protect homeowners in case they accidentally miss a mortgage payment. It also ensures that lenders receive their due payments even if borrowers face financial difficulties. Homeowners who own less than 20% equity in their homes are typically required to obtain mortgage insurance.

The premiums you pay for mortgage insurance can be deducted, but only if the mortgage is for a home you intend to occupy (not an investment property). How much you can deduct depends on your household income:

Households with income under $100,000: You can deduct mortgage insurance premiums up to 100% if your household income falls below $100,000.

Homeowners with income between $100,000 and $109,000: You can claim partial deductions. The deduction gradually decreases as income approaches the upper threshold.

Mortgage interest (on business or income-generating property)

If you use your property for business or to generate rental income, your mortgage interest is tax-deductible. During tax season, you can claim this deduction by using the rental income and expenses line 8710 on Form T776.

However, only the interest paid on your mortgage is tax deductible, not what goes towards your principal value/amount. The amount of mortgage interest you can claim for rental purposes depends on whether your property is a long-term rental or a short-term rental.

Entire year rental: If your property is rented out for the entire year, you can deduct 100% of the mortgage interest paid on that property.

Short-term rentals: For short-term rentals (e.g., Airbnb), you can only deduct mortgage interest based on how often the property is rented out. For example, if you rent out the property for a total of four months in the year, you can deduct 4/12 (33%) of your mortgage interest.

Renting out a portion of your home: You’ll need to determine the proportion of your home’s space that the rental comprises.

How to claim a portion of your home on your taxes

Here’s the general formula:

% total square footage x 12 months.

For example, if the total square footage for your home is 2,000 and the rental portion is 500 square feet, to find the % of the home that’s rented, divide the rented portion by the total square footage = 25%.

Then, multiply 25% by the total yearly mortgage interest to determine the deductible amount. If your total yearly mortgage interest is, say, $10,000, then $2,500 would be tax deductible.

For partial-year rentals, follow the same division: consider both the portion of your home that is rented and the duration during which it is rented.

Business use

Like home insurance tax deductions, if you own a business and operate it from a property you own, you can deduct the mortgage interest too.

Solely income-generating property: If your property is used exclusively for income-generating purposes (like an office used during work hours), you can deduct 100% of the property’s interest from your taxes.

Mixed-use property: If only a portion of your property generates income (e.g., a business with an apartment above), you can only claim interest payments for the income-generating portion.

Other mortgage related claims that are tax deductible

The Canadian government allows you to claim certain fees associated with money borrowed for purchasing or improving a rental property. These fees include:

Mortgage applications, appraisals, and processing fees
Mortgage guarantee fees (such as those charged by the Canada Mortgage and Housing Corporation)
Mortgage brokerage and finder’s fees
Legal fees related to mortgage financing (including those related to drafting mortgage documents or title searches)

Home insurance

Home insurance is considered a personal expense, akin to paying for peace of mind. While it helps safeguard your property, and is often necessary for applying for a mortgage, it doesn’t offer any direct tax benefits.

However, there are some exceptions:

Rental properties: If you rent out part of your property (e.g., a secondary suite or a separate apartment), you may be eligible for deductions related to that rental income.

Business use: Suppose you’re self-employed and use part of your home for business purposes (for instance, a home office). In that case, you can deduct related expenses.

Eligible expenses may include a portion of your home insurance premium, utilities (heat, water, electricity, internet, phone), condo fees (if any), rental payments, office equipment, and maintenance costs. Proper documentation is your best friend. Keep records of expenses incurred for business use – you'll need it during tax season.

Alternative tax deductions for Canadian homeowners

Canadian homeowners have several ways to reduce their taxes or make good use of government tax incentives. They include:

Property taxes: If you own a rental property, rent out a portion of your own primary home, or use it for business, you can deduct property taxes. This includes both land and building property taxes associated with the rental property.

Home buyers’ amount (formerly known as home buyer’s tax credit): If you’re a first-time homebuyer, you can claim up to $10,000 for purchasing a qualifying property.

GST/HST new housing rebate: If your home is newly built, you may qualify for this rebate.

Residential rental property rebate: If you’ve purchased or built a residential rental property, you could be eligible for this government rebate.

Moving expenses: You can claim moving expenses (located on Line 21900) if you’re relocating for work or as a full-time student.

Home accessibility tax credit (HATC): Seniors or people with disabilities may be eligible to claim an amount for up to $20,000 worth of expenses related to renovations that make your home more accessible.

Medical expense claims: In specific cases, the federal government allows medical expense claims related to your home, such as air conditioning expenses.

Some provinces offer additional tax credits. For example, Manitoba provides an education property tax credit.

How to claim home office expenses and home insurance deductions (if applicable)

When it comes to home office expenses and tax deductions, there are specific methods you can use to claim eligible costs related to your home office. Let’s break it down:

Eligible employees who worked from home in 2024 will be required to use the detailed method to claim home office expenses. The detailed method involves a more comprehensive calculation of actual expenses related to your home office. You must separate expenses between your employment use and non-employment (personal) use of your home.

To be eligible for a detailed method claim, you must meet the following criteria:

Your employer required that you work from home.
You were required to pay for expenses related to the workspace in your home.
You worked from home for at least 50% of the time for a minimum of four consecutive weeks during the applicable year. Alternatively, if your home workspace is exclusively used for earning employment income and conducting regular meetings (e.g., with customers or clients), you also qualify.
The claimed expenses are used directly for your work.
You must have received a signed and completed copy of form T2200 (Declaration of Conditions of Employment) from your employer.

For both business and home office expenses, you’re only allowed to deduct the portion of the expenses related to business usage. For example, if 20% of your cell phone usage is related to business activities, you can only deduct 20% of your monthly bills from your taxable income.

Also, if both you and your spouse worked from home and meet the eligibility criteria, each expense can only be claimed once.

Salaried employees who work from home may be eligible to claim certain home office expenses on their taxes. However, home insurance specifically is not deductible for employees working from home.

Commission employees may have additional options for claiming certain expenses, but the rules can be complex. Consulting a tax professional can help ensure accurate deductions.

Consult a tax professional or specialist

Navigating the intricacies of home-related tax deductions can be daunting. Every homeowner’s situation is unique. A tax professional can help you optimize your deductions, identify overlooked opportunities, and ensure compliance with tax laws.

While home insurance premiums and other expenses are generally not directly tax-deductible, understanding the rules and exceptions—such as mortgage insurance—can help you with your overall financial planning.