Do you own a second home that you're considering renting out? Or maybe you're taking on a new career as a property manager for a rental complex.

If so, you will likely need to create a rental invoice — also known as a rental receipt — to ensure you and your renter understand the terms of your agreement. Keeping detailed records of your rental income is also useful for tax purposes.

Read on for guidance on which rental agreements require an invoice, the items you should include, and why it's important to create a rental invoice template. 

Types of rentals that need a rental invoice

The Government of Canada distinguishes between rental income from a property and from a business. To tell the difference between the two, consider the types of services you provide your tenants. 

Rental income: If the services are basic, such as heat, electricity, parking, and laundry, this means you're receiving your rental income from a property.

Business income: If there are any additional services, such as cleaning, security, and meals, this means you are considered a business. Typically, the more services you offer, the greater the chance that your rental operation is a business.  

Business rental properties will generally be used for a corporate entity rather than a person or family. However, both residential properties and business rentals may need to provide an invoice and receipt.

Different types of rentals that may require an invoice include:

• Short-term rentals
• Long-term rentals 
• Vacation homes 
• Condominium units  
• Apartments 
• Single-family homes
• Cottages/cabins
• Townhouses
• Duplexes 
• Cars
• Tools 
• Commercial properties

What items to include on a rent invoice template

Creating a rent invoice template can streamline your invoicing process and help ensure you keep detailed records of your income.

When creating a template, include all the information necessary to help ensure you get paid on time and in full.

Include the following information on your rental invoice or rent receipt:

• Invoice number: For internal records and accounting purposes.
• Date of invoice: The date when the invoice was sent.
• Payment due date: The date when payment is due (for example, on receipt, within 15 days, within 3o days).
• Your name, address, and contact information: For landlords of small properties.
• Your company name, address, and contact information: For property managers.
• Rental type: Specify what’s being rented, and for how long.
• Rental dates: If your rental is only for a few days (for example, a cottage), put the specific dates here.
• Unit rate: Note how much the rental costs per day, per week, or other period of time for which the specific rental is eligible.
• Quantity: How many rental periods are charged?
• Total cost: Detail the total cost for the specific rental.

You can also mark the bottom of the invoice receipt for "Internal Use Only." In this section, you can keep track of items like when the lessee paid and what form of payment they used. This information is especially helpful during tax season. 

Finally, note the subtotal, the total due less any deposits, and the invoice balance.

How much should you charge on a rental receipt invoice?

To decide on a price for your rental, you should consider various factors:

• Location: The exact same rental unit in Grimsby will have a much different price than in Toronto.
• Price of similar rentals in the area: Use a resource like Rentals.ca to compare prices.
• Amenities: Is this a luxury rental or a basic apartment?
• Your financial needs: Consider what you need to cover your mortgage and expenses.

Should you send a rental invoice to your lessee? 

Yes. A rental invoice provides proof of a transaction between the renter and lessee. It includes details such as the amount due, payment due date, and when the payment was made. A rental invoice is also essential for record-keeping and accounting. 

Why Should You Send Out a Rent Receipt to Tenants?

Sending out a rent receipt to tenants will help you keep track of your revenue, accounts and expenses, which then can be used for tax deductions. You are allowed to deduct any reasonable expenses you encounter when you earn your income via rental means. There are two basic types of expenses you may deduct from your taxes: current expenses and capital expenses. 

Current expenses are repeated expenses that support a short-term benefit. For example, the cost of repairs you make to keep an asset in the same condition as it was when you acquired it. You can deduct current expenses from your gross income in the year you incur them.

Capital expenses are incurred to provide a long term benefit. For example, buying the rental property, legal fees connected with buying the property, or the cost of furniture or equipment you are renting with the property.  

Here is a list of deductible expenses you can make on your rental income, as outlined by the Government of Canada. 

• Advertising
• Insurance
• Interest and bank charges
• Office expenses
• Professional fees (includes legal and accounting fees)
• Management and administration fees
• Repairs and maintenance
• Salaries, wages, and benefits (including employer's contributions)
• Property taxes
• Travel
• Utilities
• Motor vehicle expenses
• Other rental expenses
• Prepaid expenses

When should you send a rental invoice or rental receipt to your tenant or lessee?

The invoice for a transaction in which monies are paid upfront should be issued at the time of payment.

If payment is expected at a later date, send the invoice on the date the leasing party has been told to expect to receive it.

You can easily keep track of your invoicing with cloud-based accounting tools like QuickBooks invoicing solutions. Let QuickBooks help you ensure your rental business runs smoothly. 

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