Accounting methods

Accrual method

With the accrual method, you include rents in income for the year in which they are due, whether or not you receive them in that year, and deduct your expenses in the year you incur them, no matter when you pay them.

Cash method

If you have practically no amounts receivable and no expenses outstanding at the end of the year, you can use the cash method. With this method, you:

• include rents in income in the year you receive them; and
• deduct expenses in the year you pay them.

You can use the cash method only if your net rental income or loss would be practically the same if you were using the accrual method.

When we give examples, we use the accrual method of reporting rental income.

Forms and publications

• Guide T4036, Rental Income
• Form T776, Statement of Real Estate Rentals