How do I fill out T1135 for foreign mortgage. House purchased for $400k with $10% down payment. Rental income paid $9k off principal + Interest. $5k worth of Expenses

You report the Rental Property and the income on the T1135 as a verification, not the expenses.

If the cost of the property on the day of purchase is more than $250k CAD > use part B detailed reporting of the T1135 >  report the cost value, the maximum value of the property in the year, and the income in the Real Property part 5 of the form

https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1135.html

 

If you are renting personal property (you stay in this property when visiting) to cover the expenses, then you don't have to report it as a foreign rental income. If you are renting a personal property to make revenue (income) and the cost value of the property was $100K CAD or more, then you have to report the income. 

 

To report the foreign rental income, there are two methods used in TurboTax:   

1. Report the net amount on the Foreign Income Slip or   

2. Report the gross/loss on the Rental T776 form.   

 

Reporting the net amount on a Foreign Income Slip: Do Not Use T776 

1. Foreign Property Verification Information Reporting on the T1135  

2. If the net rental income is above zero > use the other income box and the tax deducted box   

However, If the net rental income is below zero (loss in revenue) you will not be able to you the foreign slip> use other deduction profile and use the Foreign Tax Slip form.  

 

Reporting the gross/loss using T776:  

You will need to report three things:  

1.    Rental Income on a T776 form whether it is in a gross or loss amounts 

      Use your Canadian address in the form > change the city to the foreign country's city 

2.    Foreign Tax Paid on Rental Income on a Foreign Tax Credit form, and  

3.    Foreign Property Verification Information Reporting on the T1135  

 

If you are using the Foreign Tax Credit Profile with any of these reporting options: 

If you are using TurboTax Online: Report the income and tax paid under the "Foreign Real Property"   

If you are using TurboTax Desktop: Report the income and tax paid under the "Foreign Business Income" 

Any income reported under this profile will not double your rental income.  

 

I hope this was helpful