How to Complete and File the T1159: CRA Non-Resident Rental Return

Form T1159 is the T1159 non-resident rental return you file to elect under Section 216 of the Income Tax Act, reporting your Canadian rental income on a net basis instead of accepting the flat 25 percent withholding tax on gross rent as your final tax. Filing it usually produces a refund, because tax on your net rental profit is almost always less than 25 percent of every dollar of rent your tenants paid. The return has to be mailed on paper to either the Winnipeg or Sudbury Tax Centre, and the deadline depends on whether you filed a Form NR6 for the year.

Why the Section 216 Election Is Worth Filing

When a non-resident collects rent on Canadian real estate, the payer (usually a property manager or the tenant) must withhold 25 percent of the gross rent and remit it to the CRA under Part XIII of the Income Tax Act. That withholding is your final tax if you do nothing, and no expenses come off the top.¹ Electing under Section 216 by filing the T1159 switches you to graduated federal rates on net rental income, the same treatment a Canadian resident landlord receives. On $30,000 of rent with $18,000 of expenses, you pay tax on $12,000 rather than watching $7,500 disappear off the gross.

The election also covers timber royalties from a Canadian timber resource property or timber limit, but real estate rent is the reason almost everyone files.

What to Gather Before You Start

Have these in front of you before opening the form:

A tax identification number: your Social Insurance Number, Individual Tax Number, or Temporary Tax Number. If you don’t have a SIN and aren’t eligible, apply to the CRA for an ITN, a nine-digit number issued to non-residents who need to file Canadian returns.²
Every NR4 slip your payer issued for the year, showing gross rental income (Box 16 or 26, income code 13) and non-resident tax withheld (Box 17 or 27). Attach a copy of each slip to the return; without them, the CRA may disallow your credit for the tax already withheld.³⁴
Records for every expense you plan to deduct: property tax bills, mortgage interest statements, insurance premiums, repair invoices, management fees, and utility bills if you paid them.
Form T776, Statement of Real Estate Rentals. This is the worksheet where you compute net rental income; it gets filled out and attached to the T1159.⁵

Filling Out the Return

The T1159 moves through five stages. Each one asks something specific.

Identification

Enter your name, address, tax identification number, and the tax year. Add your email if you want CRA account notifications. Make sure the identification number matches what the CRA has on file. A mismatch stalls processing.

Rental Income and Expenses on Form T776

Form T776 is where the real calculation happens. Enter gross rents, then subtract each allowable expense line by line. Carry the gross rental figure to line 12599 of the T1159 and the net income or loss to line 12600. If you hold the property through a partnership, enter your share from your T5013 slip on line 7 of the T776.⁵

Other Deductions

The T1159 itself has a short list of other deductions: RRSP contributions on line 20800, First Home Savings Account contributions on line 20805, support payments on line 22000, and legal fees for objecting to a CRA assessment on line 23200, among a few others. Most filers won’t touch these. The tax savings on a Section 216 return live on the T776.

Federal Tax Calculation

The form applies Canada’s graduated federal brackets to your taxable income. Because you’re a non-resident with no province of residence, you also pay a federal surtax in place of provincial tax. The form walks through both.

Refund or Balance Owing

Enter the total non-resident tax the payer withheld on line 43700. If you disposed of a rental property and are including recaptured capital cost allowance, enter tax remitted on that recapture on line 47600. Compare credits against calculated tax. When the withholding is larger than the tax you actually owe on net income, which is the usual outcome, the CRA refunds the difference.⁴

Which Rental Expenses You Can Deduct

You claim the same expenses a resident landlord would claim. The common categories:

Mortgage interest (the interest portion of your loan payments, not principal).
Municipal and school property taxes.
Insurance premiums for fire, theft, and liability coverage.
Property management fees paid to whoever collects rent, finds tenants, or handles maintenance.
Repairs and maintenance: plumbing fixes, painting, appliance repairs. Fully deductible in the year paid.
Advertising to find tenants.
Utilities you paid rather than the tenant.
Legal and accounting fees tied to renting the property, collecting overdue rent, or preparing the return.

Draw a clean line between repairs and improvements. Fixing a broken furnace is a current expense you deduct now. Replacing it with a higher-capacity model is a capital expenditure; the cost gets added to the property’s capital cost and comes back to you over time through capital cost allowance. CRA Guide T4036 (Rental Income) works through this distinction in detail.

Should You Claim Capital Cost Allowance

Capital cost allowance is optional depreciation on the building and certain equipment. It can lower your taxable rental income, but two rules matter. First, CCA cannot create or increase a rental loss.⁶ If your other expenses already exceed rental income, CCA is off the table. If you have $2,000 of net income before CCA, you can claim up to $2,000, and not a dollar more.

Second, any CCA you claim will be recaptured and added to income when you sell. For many non-resident landlords the short-term reduction in tax isn’t worth the eventual recapture bill on disposition. Model both years before you decide.

Where to Mail It and When It’s Due

You cannot file the T1159 online. Mail it, with the T776, all NR4 slips, and any supporting documents the CRA requests, to the tax centre that matches your country of residence:⁵

United States, United Kingdom, France, Denmark, or the Netherlands: Winnipeg Tax Centre, PO Box 14001, Station Main, Winnipeg MB R3C 3M3, Canada.
All other countries: Sudbury Tax Centre, 1050 Notre Dame Avenue, Sudbury ON P3A 5C2, Canada.

Deadlines depend on your situation:

General rule: within two years after the end of the calendar year the rental income was paid or credited to you. For 2025 rents, that is December 31, 2027.¹
With an approved NR6: June 30 of the year following the tax year. For 2025 income, June 30, 2026.⁷
If you sold rental property with CCA recapture: April 30 of the following year, whether or not you filed an NR6.⁴

The two-year window is generous, but it is not a soft deadline. Miss it and you lose the election. The 25 percent already withheld becomes your final tax, and none of it comes back.

Cutting Withholding During the Year With Form NR6

Waiting up to two years for a refund on over-withheld tax ties up cash you could be spending on the property. Form NR6 fixes that. You and a Canadian-resident agent file it with the CRA before the rental year starts, estimating gross rent and expenses. Once approved, your payer withholds 25 percent of the estimated net rent instead of 25 percent of gross, which is a much smaller monthly hit.¹

The trade-off: filing an NR6 locks in a June 30 filing deadline for the T1159, and your Canadian agent is jointly and severally liable if the return isn’t filed. The agent also remits the monthly withholding and prepares the NR4 slips. Usually this is the property manager, but it can be any Canadian resident willing to accept the obligation. Pick someone reliable, because if they drop the ball, the CRA can pursue both of you.

Penalties and Interest If You File Late

Owing tax and filing late triggers a penalty of 5 percent of the balance owing, plus 1 percent for each full month the return is late, up to 12 months. That caps penalties at 17 percent of the balance. If the CRA already penalized you for late filing in any of the three preceding years and issued a formal demand to file, the penalty rises to 10 percent plus 2 percent per month, up to 20 months.⁸

Compound daily interest runs on any unpaid balance on top of penalties. The CRA’s prescribed rate for overdue tax in the first quarter of 2026 is 7 percent, updated quarterly.⁹

After the Return Goes In

The CRA reviews the return and issues a Notice of Assessment showing your final numbers, any refund, or any remaining balance.¹⁰ Read it closely. The CRA sometimes adjusts expense claims or disallows deductions, and the Notice is where that first shows up.

If you owe a balance and don’t have a Canadian bank account, you can pay by international wire transfer directly to the CRA.¹¹ With a Canadian bank account, use your bank’s online bill-payment feature. Keep the Notice of Assessment; you’ll need the account and reference information from it to direct the payment.

Extra Filings if You Live in the United States

If you’re a U.S. tax resident, the T1159 handles the Canadian side only. The IRS taxes worldwide income, so report the net Canadian rental profit on Schedule E of Form 1040.¹² Claim a foreign tax credit on Form 1116 for the Canadian tax paid on that income, categorized as passive income, with the withheld or paid amount reported in Part II.¹³

If your Canadian bank accounts held more than $10,000 in aggregate at any point during the year, file FinCEN Form 114, the FBAR. It goes to the Financial Crimes Enforcement Network, not the IRS, with its own deadline and penalty regime.¹⁴ A rental property bank account in Canada counts toward the $10,000 threshold.

1
Justice Laws Website. Income Tax Act
2
Canada Revenue Agency. Applying for an individual tax number (ITN)
3
Canada Revenue Agency. Filling out the NR4 slip
4
Canada.ca. Income Tax Guide for Electing Under Section 216
5
Canada.ca. How to complete your return
6
Canada Revenue Agency. Amount of capital cost allowance you can claim
7
Canada Revenue Agency. Electing under section 216 – When to file a return
8
Canada Revenue Agency. Interest and penalties on late taxes – Personal income tax
9
Canada.ca. Interest rates for the first calendar quarter
10
Canada Revenue Agency. Notices of assessment – NOA or NOR – Personal income tax
11
Canada.ca. Pay at a bank or credit union through wire transfer
12
Internal Revenue Service. About Schedule E (Form 1040), Supplemental Income and Loss
13
Internal Revenue Service. Form 1116 Foreign Tax Credit (Individual, Estate, or Trust)
14
FinCEN.gov. Report Foreign Bank and Financial Accounts