You redo the roof, repaint a unit, replace a few windows on your plex: every invoice raises the same tax question. Is it a current deductible expense this year, or a capital expense that will be deducted only slowly? Classifying a current expense vs a capital expense correctly changes both your tax bill this year and the taxation of your rental property when you sell. This guide, grounded in the criteria of the Canada Revenue Agency (CRA) and Revenu Québec, helps you decide — with concrete examples for multi-unit owners on the North Shore and across Quebec.
What sets a current expense apart from a capital expense?
A current expense is a recurring cost that restores or keeps the plex in its original condition — it is 100% deductible against the year's rental income. A capital expense provides a lasting benefit, improves the property or replaces it entirely: it is added to the property's cost and deducted gradually through capital cost allowance.
The principle is easy to state, trickier to apply. Per the CRA and Revenu Québec, a current expense is a generally recurring outlay that provides only a short-term benefit: it maintains your income property in its current state. Repainting, fixing a leak, replacing a broken part — you are simply keeping the property as it was.
A capital expense, by contrast, provides a lasting benefit. It improves the plex beyond its original condition or replaces a component entirely with something better or new. It is not a deduction for the year: the cost is added to the building's tax value and recovered slowly, year after year, through capital cost allowance (CCA).
How do the CRA and Revenu Québec decide repair or improvement?
No single criterion decides. The CRA asks a series of questions: does the expense provide a lasting benefit? Does it restore the property or improve it? Is a part being replaced, or the whole? Is the amount large relative to the property's value? Is it recurring maintenance? The analysis is case by case.
Neither the CRA nor Revenu Québec sets a dollar threshold. They apply a grid of factors instead, none of which is decisive on its own:
| Criterion | Points to a CURRENT expense (deductible) | Points to a CAPITAL expense (depreciable) |
|---|---|---|
| Lasting benefit | Short-term benefit, recurs | Benefit over several years |
| Maintain or improve | Restores the property's original state | Makes the property better than before |
| Part or whole | Repairs a part of the property | Replaces the whole property |
| Relative value | Low cost vs the building's value | High cost vs the building's value |
| Nature of the replacement | Equivalent to the old one | Markedly superior to the old one |
These criteria are set out in the CRA's T4036 "Rental Income" guide and in Revenu Québec's documentation on income from rental property. In practice, you add up the signals: the more "capital" boxes your project ticks, the more it must be depreciated rather than deducted.
Sources: CRA — Guide T4036 "Rental Income" and Revenu Québec — Rental income.
Roof, paint, windows: current or capital expense?
Paint between two tenants = current (deductible). Fixing blown-off shingles = current. Redoing the entire roof = capital. Replacing windows, especially with higher-performing models = capital. Fixing a pane or mechanism = current. The rule: a one-off fix is current; a full replacement or a lasting improvement is capital.
The three most common cases for plex owners illustrate the dividing line well:
- The roof. Replacing a few shingles blown off in a storm is a current repair, deductible. Redoing the entire roof covering is a capital expense: you restore the property for many years. Moving from an old covering to a markedly superior system reinforces the capital character further.
- Paint. Repainting a unit to restore it between two tenants is the textbook current expense — fully deductible in the year. It does not extend the building's useful life; it merely maintains it.
- Windows. Replacing windows, especially with energy-efficient models that outperform the old ones, is generally a capital expense. Repairing a window, or replacing a broken pane or mechanism, remains a deductible current repair.
The rule of thumb
- Repair a part, like-for-like, at low cost → current deductible expense
- Replace the whole, with something better, at high cost → depreciable capital expense
- When in doubt, add up the CRA's criteria — and have an accountant confirm
What is the real tax impact of each category?
A current expense reduces your taxable rental income this year. A capital expense raises the plex's tax cost and is deducted slowly through CCA — but the CCA claimed will be recaptured and taxed at sale, while the higher cost reduces the future capital gain. So the choice of category has an immediate AND a long-term effect.
The distinction is not just a bookkeeping formality: it shifts tax over time.
A current expense comes straight off your rental income for the year. If you collect $24,000 in rent and incur $3,000 of deductible repairs, you are taxed only on the difference. The tax saving is immediate.
A capital expense works differently. Its cost is added to the building's depreciable value and deducted over several years via CCA. When you sell, two mechanisms come into play: the CCA you claimed may be recaptured and added to your taxable income, while the higher cost of the property can reduce your capital gain. To understand the taxation of the sale itself, see our guide to the capital gain on selling a plex in Quebec.
What are the common mistakes to avoid?
These mix-ups are costly if you are audited:
- Deducting a big renovation all at once. Trying to run a full roof or window replacement through as a current expense is the classic red flag — and the first line item to be reassessed.
- Deducting work done right after purchase. The CRA often treats putting a building acquired in poor condition (and bought cheaper for that reason) back in order as a capital expense, even if it is technically a repair.
- Confusing it with sales taxes. How a renovation is treated for income tax differs from GST/QST treatment. On tax rebates, see our guide to the GST/QST rebate for renovating a rental property.
- Failing to split a mixed project. Many jobs combine repair and improvement — you often need to allocate the invoice between the current portion and the capital portion.
A grey case is not a blank cheque
Many projects mix repair and improvement (for example fixing a damaged bathroom and modernizing it). In that case you often have to split the invoice between the current and the capital portions. A contractor's invoice itemized line by line is your best ally.
How do you document your plex expenses properly?
Whether the expense is current or capital, proof is your protection. Keep, as a matter of routine:
- The itemized invoices (materials, labour, line by line) and the signed contracts;
- The proof of payment (statements, cheques, transfers);
- Before-and-after photos documenting the original state and the nature of the work;
- A separate capital assets register to track the depreciation of each capital expense.
These records serve three key moments: justifying the nature of each expense in an audit, calculating CCA correctly each year, and establishing the building's adjusted cost base at sale. A well-kept file can make a real difference to the tax paid on disposition. For the taxation of the sale itself, our guide to the capital gain on selling a plex in 2026 rounds out the picture.
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This guide is for information only and does not replace advice from an accountant or tax specialist. Whether an expense is current or capital is assessed case by case under the current rules of the CRA and Revenu Québec.
