Section 216 Election: Complete Guide for Canadian Non-Resident Landlords (2026)

Section 216 of the Canadian Income Tax Act gives non-residents an alternative to the flat 25% Part XIII withholding tax. Under the default rule, the payer (typically your Canadian property manager or resident agent) withholds 25% of gross rent each month and remits it to CRA. That is the end of your Canadian tax obligation — but it ignores your expenses entirely.

Section 216 lets you elect to be taxed instead on net rental income after deductible expenses (mortgage interest, property taxes, insurance, repairs, management fees, etc.), at the same graduated rates Canadian residents pay. For almost every non-resident landlord with real expenses, this is a much smaller number than 25% of gross — often by thousands per year.

The mechanics: you file a Section 216 return after the tax year ends, reporting gross rent and deductible expenses, and the CRA refunds the difference between what was withheld and what you actually owe on the net amount. For most non-resident landlords this is the single most impactful tax-recovery move available.

Concrete example. A US-resident landlord owns a Toronto condo collecting $2,500 CAD/month in rent:

• Annual gross rent: $30,000 CAD
• Part XIII withholding (25% × gross): $7,500/year
• Deductible expenses (mortgage interest $9,000 + property tax $3,500 + insurance $1,200 + management fee $2,400 + repairs $1,500 + utilities $0): $17,600
• Net rental income: $30,000 − $17,600 = $12,400
• Section 216 tax (federal + provincial, ~30% effective on $12,400): roughly $3,700/year
• Refund from CRA: $7,500 − $3,700 = $3,800/year

That $3,800 is real money — and over a 10-year hold period, $38,000 of compounding tax savings. The filing itself costs $500-1,500 in CPA fees per year. The math is overwhelming for anyone with mortgage interest.

When you do NOT need Section 216: if your property is owned outright with no mortgage, no professional management, and minimal expenses, your net rental income may approach gross rent and the 25% withholding might be close to your actual tax. Run our CRA Part XIII Remittance Calculator with your real numbers before assuming.

Section 216 recovers excess withholding after the year ends. Form NR6 reduces the withholding in real time during the year.

Filed before January 1 of the year you want it to apply, NR6 tells CRA: “I will file a Section 216 return at year-end, so authorize my withholding agent to withhold 25% on netrent (rent minus projected expenses) instead of 25% on gross.” CRA reviews and approves, then notifies your withholding agent.

Using the example above:

• Without NR6: $625/month withheld ($7,500/yr)
• With NR6: 25% × $1,033 net = ~$258/month withheld ($3,100/yr)

Cash flow benefit: you keep $4,400 in your pocket throughout the year instead of waiting 12-18 months for a Section 216 refund. The annual Section 216 return still gets filed to true-up — but the gap between withholding and actual tax is small, so the refund/payment at year-end is tiny.

Deadline: NR6 must be filed before January 1 of the year you want it to apply, OR before the first rent payment for a new property mid-year. Late NR6 filings are not accepted retroactively — you would just file Section 216 at year-end to recover normally. See our NR4 Form Complete Guide for the broader withholding mechanics.

Non-residents of Canada have two filing paths to claim deductions against Canadian rental income:

• Section 216 return. A separate tax filing specifically for the rental income, using a regular T1 form with the election made. Reports only the rental income/expenses, not your worldwide income. Refund or balance reconciliation against Part XIII withholding.
• Section 217 election. For non-residents receiving certain Canadian-source pension or annuity income. Not applicable to most rental landlords. Mentioned here only to avoid confusion.

The clean answer:if you are a non-resident of Canada with Canadian rental property and you want deductions, you file a Section 216 return. Period. There is no “regular T1” alternative — non-residents do not file T1 returns the way Canadian residents do.

If you become a Canadian resident again partway through the year, the filing changes — you file a part-year resident T1 and a Section 216 return for the period of non-residency, with careful date allocation. Get a cross-border CPA for that year.

The mechanics of filing Section 216:

1. Gather your NR4 slip(s). Your withholding agent (property manager or resident agent) issues NR4 by February 28 of the year following the tax year. Box 16 shows gross rent paid. Box 17 shows total tax withheld.
2. Compile expense records. Mortgage interest (lender statement), property taxes, insurance, repairs, utilities, management fees, advertising, professional fees. Every deductible expense needs documentation.
3. Complete Form T776 for each property. Gross rents (line 8141), expenses by category, net rental income (line 9369). One T776 per property. See our T776 Complete Guide for the line-by-line walkthrough.
4. Complete the Section 216 T1.Federal tax return marked “Section 216 return” in the upper right. Net rental income from T776 flows to line 12600. No other Canadian income reported (non-residents only report the rental).
5. Claim the withholding as tax paid. Total Part XIII tax from NR4 box 17 goes on line 43700 (foreign tax credit / tax already remitted). This is the credit against the tax you actually owe on net rent.
6. Determine refund or balance owing. If withholding exceeded actual tax, you get a refund. If actual tax exceeded withholding (rare with NR6 in place), you owe the difference.
7. File by mail or NETFILE-eligible software. Some non-resident-friendly tax software supports Section 216 NETFILE filing. Otherwise mail to the International/Ottawa tax centre.

Most cross-border CPAs charge $500-1,500 per year for a Section 216 return, including the T776 preparation. For a landlord recovering $3,000+ in over-withheld tax, the math obviously works.

Filing deadline. Section 216 returns must be filed within two years of the end of the tax year. So the 2025 Section 216 return is due by December 31, 2027. In practice, most landlords file along with their regular spring filing (April-June of the year after) to align with their US 1040-NR and Canadian foreign tax credit cycle.

NR6 was in place but you missed the filing window? If you had NR6 approved and then fail to file Section 216 within the deadline, CRA can reassess and recover the difference between the reduced withholding and the full 25% — meaning you owe the gap CRA never collected. Do not skip the filing if you had NR6 in place.

Refund timeline. CRA typically processes Section 216 returns in 90-120 days. Refunds arrive by direct deposit (if you have a Canadian bank account) or paper cheque (mailed to your foreign address). Setting up CRA direct deposit to a Canadian account from abroad is worth the friction — paper cheques to foreign addresses can take an extra 4-6 weeks.

Amendments. If you discover an error after filing — missed expenses, wrong gross rent — file T1-ADJ (Adjustment Request) to correct the prior return. CRA accepts adjustments up to 10 years back for most situations, though earlier returns require more documentation.

If you are a US person (citizen, green card holder, or US tax resident) earning Canadian rental income, Section 216 is part of a two-side tax cycle:

• Canadian side: Section 216 establishes your actual Canadian tax on net rental income, which is less than the 25% withholding you would otherwise pay.
• US side: You report the same Canadian rental income on US Schedule E (converted to USD), and the actual Canadian tax paid (per Section 216 reconciliation, not the gross withholding) becomes a foreign tax credit on Form 1116.

The order issue: you cannot finalize the US Form 1116 until Section 216 produces the actual Canadian tax paid. Most cross-border CPAs file Section 216 in early spring so the actual Canadian tax number is settled before the US return is filed by April/June.

Why this matters: the foreign tax credit is based on actual Canadian tax paid, not on the gross withholding. If you were over-withheld and recovered the difference via Section 216, only the net amount counts as foreign tax for credit purposes. The IRS will not let you credit tax you got refunded back.

For US-side procedures, see our How to File Form 1040-NR for US Rental Income guide.

What costs the most money:

1. Not filing at all. Some non-resident landlords assume the 25% gross withholding is the final word. It is not. Section 216 typically recovers thousands per year for any landlord with mortgage interest and real expenses.
2. Missing the 2-year deadline. File within two years of year-end. After that, the right to file Section 216 expires and the withholding becomes the final tax — non-recoverable.
3. NR6 in place but Section 216 not filed. If you reduced withholding via NR6 and then never file the Section 216 reconciliation, CRA can reassess and recover the gap. NR6 commits you to filing.
4. Claiming personal expenses or CCA. Personal-use portion of any expense is not deductible. Capital Cost Allowance (CCA) is technically claimable but creates recapture on sale that often eliminates the benefit — most cross-border CPAs skip CCA on Section 216 filings.
5. Wrong year on T776 or T1. The Section 216 T1 must match the calendar year of the NR4 slip. Mixing years invalidates the return and triggers reassessment.
6. Missing the foreign tax credit on the US side. If you are a US person, the Canadian tax paid via Section 216 is creditable on US Form 1116. Forgetting to claim it means paying both countries on the same income.

Tools:

• CRA Part XIII Remittance Calculator — see your monthly withholding with and without NR6
• Section 216 form reference page
• NR6 form reference page
• NR4 form reference page
• T776 form reference page

BorderBird tracks every rent payment and expense per the CRA 15th-of-month rule, supports NR6 net-rent calculations, and produces the T776-ready category data your CPA needs to file Section 216 efficiently. Every Part XIII calculation shows the underlying receipts so the supporting schedule is audit-defensible. Try BorderBird free — one property, one full year, no credit card.

Related reading:

• NR4 Form: Complete Guide for Non-Resident Landlords
• T776 Rental Income Form: Complete Guide
• How to File Form 1040-NR for US Rental Income
• Canadian Owning Rental Property in the US: Complete 2026 Guide