How do I enter rental property income if my spouse and I are co-owners?

Starting January 1, 2024, there are restrictions to expense deductions for short-term rentals, if the property is non-compliant.

Starting January 1, 2024, a property is a non-compliant short-term rental property when:

• It’s offered for less than 90 days of continuous rental and
• It’s in a province or municipality that:
  • Prohibits short-term rentals or
  • Requires a registration, license, or permit, which the owner hasn’t obtained

There’s a transitional grace-period rule: 

• A non-compliant property brought ‌into compliance by December 31, 2024, is considered to be compliant for the 2024 tax year.

For any short-term rental property, there’s a disallowance of rental expense deductions from income if there’s any non-compliant rental:

• The disallowance is based on the ratio (percentage) of the number of non-compliant short-term rental days to all the days of short-term rental in the year.

That percentage, applied to the amount of rental expenses attributable to all of the short-term rental days, gives us the disallowed rental expense amount.

Open a new tax file in TurboTax Online and complete the initial interview steps including these two:

1. At Which of these applied to you in 2024? select Owned a rental property.
2. At Who are you preparing this return for? select My spouse/partner and me.
3. After completing the initial interview steps, 2024 tax return is now unlocked. Under To do, select Tax profile > Your tax profile and complete the tax profile steps.
4. At 2024 tax return, under Add to your return, enter rental and select Rental Properties. 
5. At Rental Profile, check the Details of Other Owners and Rental Income boxes and any other applicable boxes.
6. At Real Estate Rentals Statement (for spouse 1), enter the details, including seleting the Type of ownership.
7. At T776 Partner Details Statement for spouse 1, under Details for your spouse—Partnership share %, enter spouse 2's percentage interest, regardless of whether it is a co-ownership or a partnership.
8. At T776 Partner Rental Income (spouse 1), enter your rental property address information, including the amount of gross rent income.
9. Complete the applicable rental expense steps as they appear, such as these common ones:
   • T776 Rental Expenses.
   • here's your capital cost allowance for your assets screen and Enter UCC Balances from Prior Year or Enter Additions / Dispositions in Current Year
   • T776 - Non-compliant amount of expenses and CCA for short-term rentals screen
10. At Rental Summary, review the summary info and if it’s complete, select Done with Rental Income.

Open a new tax file in TurboTax Online Premier. Complete the following steps:

1. At What’s your marital status, select Married or Living Common Law as applicable, then choose to prepare your returns together.
2. At What happened to you in 2024, under did you have employment, rental, or other income, check the box for I have rental property...
3. Repeat the previous step for your spouse.
4. At Real Estate Rentals Statement #1 (for you), select Co-ownership or Partnership, then provide your ownership interest percentage.
5. At Rental Profile, check the Details of Other Owners and Rental Income boxes, and all other boxes that apply to your situation.
6. At your T776 Partner Details Statement #1, if the only partner or co-owner is your spouse, disregard this and select Continue.
7. At your T776 Rental Income, make sure to enter 100% of the gross rental income. Don't allocate a portion of the income based on ownership.
8. At T776 Rental Identification for your spouse, select the property address from the dropdown (unless each of you has a different opening UCC balance).
9. At your spouse's Real Estate Rentals Statement # 1, enter your spouse's co-ownership or partnership percentage.
10. At Rental Profile # 1 for your spouse, select all the boxes that apply.
11. Disregard T776 Partner Details Statement # 1 for your spouse if there are no other partners or co-owners, select Continue.
12. Your spouse's T776 Rental Income screen will then auto-populate with all required information, based on your previous answers.
13. Continue to Rental summary, and if it’s complete, select Done With Rental Income. Your information is now detailed separately on your Total income summary.

Open a new tax file in TurboTax Desktop. Complete the following steps:

1. On the TurboTax Personal Information form, enter your information, then check the box for Process spouse's return as well?, and complete the spouse/partner’s info.
2. On the T1 General form, complete the required information for pages one and two.
3. Select Forms from the ribbon at the bottom of the screen.
4. Select Form Lookup, then enter T776 as the Keyword to search for, and select OK.
5. On your T776 - Part 1 form, select Yes or No (as applicable) to the question Was this the final year of rental operation? 
6. Enter your percentage of ownership and select co-ownership (or partnership, if applicable).
7. On your T776 - Part 3 form, enter the rental property address, number of units, and 100% of your gross rent amount.
8. Review the information on your T776 - Income form to make sure it's accurate.
9. Select your spouse's name from the ribbon at the bottom of the screen. TurboTax will automatically generate the T776 for the spouse.
10. On the T776 - Part 1 (for your spouse), answer the question Was this the final year of rental operation?
11. Enter the percentage of ownership, and select co-ownership (or partnership, if applicable).
12. Complete T776 - Part 3 for your spouse.
13. If you've only entered rental income into TurboTax so far, you can look at the Quick Graphs summary on the left. This will make sure the correct rental income amounts are reported for both you and your spouse (optional).