Sell or Rent Out Your Home in Ontario: Rules and Taxes

People who move to a smaller place sometimes keep the family home as a rental. It can look simpler than selling, yet it adds legal and tax duties that last as long as the tenancy. This guide sets out what the official Ontario.ca, Landlord and Tenant Board and Canada Revenue Agency pages say, as read in October 2026. It is general information, not legal, tax or financial advice. Have a lawyer licensed in Ontario and an accountant review your case, because the details of your property and your history decide the outcome.

Selling versus renting: what changes

If selling is still on the table, our net proceeds guide and the calculator show what a sale would leave you, which is the number to compare against rental income.

Landlord obligations under the Residential Tenancies Act

The Residential Tenancies Act, 2006 sets the rules for most residential rentals, and the Landlord and Tenant Board (LTB) resolves disputes under it. These points come from Ontario.ca and the LTB guide to the Act.

• Maintenance. Ontario.ca says the landlord must maintain the rental unit and property, while the tenant must repair or pay for damage caused by the tenant or guests. The LTB adds that a landlord must keep the property in a good state of repair and cannot shut off vital services such as heat, electricity, fuel or water.
• Standard lease. Ontario.ca says the standard lease is required for most residential tenancy agreements signed on or after April 30, 2018. The landlord must give the tenant a copy within 21 days after the tenant signs it. A lease cannot, for example, forbid guests or shift the landlord's repair duties to the tenant.
• Entering the unit. The LTB says a landlord may enter with 24 hours written notice between 8 a.m. and 8 p.m. for stated purposes such as repairs, inspections or showing the unit to a buyer.
• Deposits. The LTB says a monthly rent deposit cannot exceed one month's rent, may only be applied to the last rent period and earns yearly interest. Ontario.ca says a rent deposit cannot be used as a damage deposit.
• Ending a tenancy. Ontario.ca says a landlord cannot remove a tenant without written notice on the LTB's form and an eviction order from the LTB. Ending a tenancy because you want to live in the home again, or for renovations, brings notice and compensation rules, so read the current Ontario.ca page or call the LTB at 1-888-332-3234 before you rent with that plan in mind.

Breaking these rules can have consequences. Ontario.ca has a page on rental housing offences. Moving into a rental home yourself later is not simple, which is a reason to rent only if you are prepared to be a landlord for some years.

Rent increases and the 2027 guideline

Ontario.ca states that the rent increase guideline for 2027 is 1.9%. A landlord must give written notice of an increase in the proper form at least 90 days before it takes effect, and at least 12 months must have passed since the last increase or the start of the tenancy. The guideline does not apply to units first occupied for residential purposes after November 15, 2018. The LTB says an above-guideline increase requires its approval for specific reasons. The guideline is set each year, so look up the figure for the year of the increase rather than relying on this one.

Principal residence exemption when you rent out your home

The Canada Revenue Agency says that if the property was solely your principal residence for every year you owned it, there is no tax on the gain when you sell, and since 2016 the sale and designation must be reported on your return (Schedule 3 and Form T2091(IND)). Renting changes the analysis.

• Change of use. When you change a property from a principal residence to a rental, the CRA says you are considered to have sold it at fair market value and reacquired it at that amount, even though you did not sell it. That can trigger a capital gain in the year of change.
• The 45(2) election. You may elect under subsection 45(2) of the Income Tax Act so that you do not report a gain when you change the use. You then cannot claim capital cost allowance on the property, you cannot designate another property as your principal residence for those years, and you can designate the home as your principal residence for up to four years. To elect, attach a signed letter to your return for the year of the change, describing the property and stating that you want subsection 45(2) to apply.
• Renting part of the home. The CRA says a partial change of use may not count as a change if the rental use is relatively small compared with the personal use, there are no structural changes and no capital cost allowance is claimed. If it does count, you split the selling price between the personal and rental portions and report the gain only on the rental portion on Schedule 3. Since March 19, 2019, elections under subsections 45(2) or 45(3) are available for partial changes.

The capital gains inclusion rate in law is one-half (50%) as of 2026, since the proposed increase was cancelled on March 21, 2025. Whether renting for years leaves part of the later gain taxable depends on how long and whether you elect, which is a question for an accountant. Our guide to capital gains and selling your principal residence explains the basic exemption.

Other home-related benefits can depend on living in the home. The Ontario Senior Homeowners' Property Tax Grant requires that you own and live in the home, so check any benefit before you move out.

Reporting rental income in Canada

The Canada Revenue Agency says you report rental income earned in the calendar year, from January 1 to December 31, using Form T776, Statement of Real Estate Rentals. Most people use the accrual method, which means counting rent in the year it is due and deducting expenses in the year they are incurred. You can deduct reasonable expenses to earn the income. Repairs that keep the property in the same condition are current expenses, while other costs are capital expenses with different treatment. If you rent part of your home, you allocate expenses by square metres or number of rooms. Net rental income goes on line 12600 of your return.

Keep records of rent received, receipts, mortgage interest statements and property tax bills. Ask an accountant how to treat expenses, and ask your insurer whether your policy covers a rented home, since an owner-occupied policy may not. We have not confirmed that on an official page, so we are not stating the rule.

If the home is a condo or in a community

Condo governing documents can restrict short-term rentals, and the Condominium Authority of Ontario says owners must notify the corporation if they lease their unit. Land lease and life lease homes follow different rules: the Residential Tenancies Act covers land lease communities, while Ontario.ca says no Ontario legislation specifically regulates life lease housing and the contract governs. Check the agreement or the community rules before you plan to let it. See life lease and land lease homes and buying a condo in Ontario.

Selling later, and passing the home on

Many owners rent for a few years and then sell. The Canada Revenue Agency says that when you sell a property that was partly or fully income-producing, you report the sale on Schedule 3 and complete Form T2091(IND) to designate the years you claim as a principal residence. Keep your records of when you moved out, any election letter and the home's value at the time of change, since the numbers matter on the later sale. If you hold the home until death, the CRA treats the deceased as having sold all property just before death at fair market value, and the designation forms must still be filed with the final return. Spousal rollover is available when property goes to a resident spouse or common-law partner. Ask an accountant how that applies to a home that was a rental.

How to decide: sell or rent out your home

• Get the net proceeds of a sale and a quote on what you could rent for, from an agent or a property manager of your choosing.
• Ask an accountant whether to make the 45(2) election and what rental income does to your return.
• Ask a lawyer licensed in Ontario about the lease, notice and what happens if you need the home back.
• Think about your mortgage, repairs and the year you may want to sell, since an older home may need work first. See preparing an older home for sale.
• Check the buy-side too: land transfer tax falls on the buyer of the next home. See land transfer tax in Ontario and buying first or selling first.

For wider planning, see downsizing tips for seniors in Ontario and the costs and money page. The Landlord and Tenant Board, the Canada Revenue Agency and Ontario.ca are listed on our resources page. If you want to talk through timing a sale, contact us.