Airbnb Tax Info Canada

Tax Implications of Short-Term Rentals for Property Owners

Short-term rentals like Airbnb are becoming increasingly popular. We get a huge number of inquiries about them at my real estate law office in Edmonton, Alberta, and I know that folks are concerned about them across Canada. The legal issues with short-term rentals often have to do with local zoning regulations for a property, which can vary by city and even by neighbourhood. The tax implications of Airbnb (or its competitors like Vrbo, HomeAway, TurnKey, FlipKey, etc.), however, are mostly provincial and national. This blog post will flag some of the key considerations and link to further reading from accountants who specialize in real estate investment.

What kind of income are you making and how will it be taxed? What if you have a combination of short-term and long-term, does this make a difference? What if you’ve purchased the property by way of Agreement for Sale and you plan to turn it out on a Rent-to-Own to someone who is doing short-term rentals? There are certainly a lot of questions. Make sure you start thinking through them—especially if you’re planning to attend our upcoming AFS (Agreement for Sale) Intensive workshop coming up September 14, 2019 in lovely Red Deer, Alberta.

Airbnb Tax Classification and Reporting

The first tax considerations with short-term rentals like Airbnb is how much money you’re making and how you’re making it. For people looking to rent a spare room occasionally for extra cash, it can be relatively simple. No matter what, you’ll need to declare the gross income and expenses on your tax return. If you’re making less than $30,000 Canadian per year with short-term rentals, you don’t need to charge sales tax (GST/HST). If you only provide a furnished space to guests, the income is declared as rental income on your tax return.

Things with tax are not always as simple as they seem. If you provide additional services to guests, like breakfast, laundry, guided tours, etc. then the income could be considered a business, and it is declared—and taxed—differently. Furthermore, if you do short-term rentals most of the time, your property may no longer be considered a residential complex for tax purposes. In some provinces or cities, there may also be additional accommodation taxes or levies on short-term rentals. As always, be sure to do your due diligence.

Tax Deductions and Property Status

When reporting expenses to reduce the tax burden, short-term rental hosts must distinguish between two types of deductions. First are current expenses, which are regularly re-occurring costs like mortgage, utilities, insurance, and repairs. The expenses can be prorated against the amount of time that a property was rented out, as well as the amount of the space that was rented (i.e., one room vs. a whole house).

Second are capital expenses, which are more durable, such as renovations and improvements to the building. There is a limited capital expense allowance in any given year, but the costs can be deducted over several years.

N.B. Claiming capital expenses can change the tax status of your property!

When you sell a property that is your primary residence or a long-term rental, it is typically exempt from the GST/HST. On the other hand, property that is mostly used for short-term rentals is subject to GST/HST when you sell. Also, if you claim capital expenses on your home or rental property to offset short-term rental income, it can prevent you from claiming the principle residence GST/HST exemption when selling. The Canada Revenue Agency won’t let you just change the status back to being a principle residence or long-term rental before selling; if you do that, you as the owner will be liable for GST/HST on the market value!

Dig Deeper on Tax for Short-Term Rentals

This blog post has introduced some of the important issues of tax for Airbnb and other short-term rentals in Canada. Tax law is complicated, and it’s important to do your due diligence if you want to become a host or if your Rent-to-Own tenant/buyer is planning on hosting. We are happy to link everyone to our friends at BDO Canada who have written a more in-depth article and a helpful FAQ on the subject.

Tax Considerations for Airbnb Hosts

Short-term Rentals: Top GST/HST Questions Answered

One last bit of advice. Keep records about all your income and expenses for short-term rentals, as well as details about number of guests, length of stay, services provided, etc. If the tax collector comes knocking, you’ll want to be prepared to answer all their questions! You may wish to consult an accountant early to avoid hassles down the road.

 

“Airbnb  Apartment Rental Logo Holiday Screen” image by TeroVesalainen used under a Pixabay License.

Invest in Real Estate with Little—or No—Money

Announcing an All-Day, Dig-Deeper AFS Intensive Focus Workshop: 14 Sept 2019 in Red Deer, AB.

Anyone who follows me knows that I love Agreements for Sale (AFS)! It’s a seller financing strategy that is so, so relevant in today’s tough Canadian real estate market—especially in Alberta. AFS is a classic way of buying property with very little money out of your own pocket. On September 14th, we’re running a special AFS Intensive Focus Workshop, featuring comprehensive tools to help both new and established investors achieve financial success. Continue reading

Billionaires Bet Big On Oil-sands

Alberta Tar-sands Could See Growth from Demand for Plastics.

Major oil companies have been fleeing the oil-sands. Huge companies like Devon Energy and Shell Oil have sold their Northern Alberta oil-sands interests and projects at fire sale prices. HSBC has formally stated that they will no longer invest in the oil-sands. Does that mean Fort McMurray is dying and will soon be a ghost town?  That’s just the way the oil-sands cycle has peaked and fallen so many times in the past. If the oil-sands are dead, it could be bad news for Alberta real estate investors… Continue reading

Murder Disclosure When Real Estate Is Sold

Violent, Gang-related Death at a Vancouver Mansion Leads to Lawsuit re What Sellers Must Reveal to Buyers in Real Estate Transactions

When selling a house in Canada (and other jurisdictions with similar legal systems), a vendor must typically disclose certain types of defects in the property to potential buyers. Now, what if murder, suicide, or other nasty violence occurred in the house? How much does a seller have to reveal? The short answer is that a seller is only obligated to reveal the death if specifically asked about it by the purchaser. The legalities of the long answer are much more interesting, as this blog post will elaborate with an example from Vancouver, British Columbia. Continue reading

When to Buy Real Estate

Buy Low, Sell High Is Still Smart; Here’s Why.

Trying to answer the question ‘should I buy now?’ is universal in the real estate world. Normally I write about Alberta real estate because I’m an Alberta lawyer, but I don’t think it matters if you live in Edmonton or New York, Calgary or London. It also doesn’t matter if you’re buying a home or looking for an investment property; their home is many folks’ biggest investment, so it’s smart to think like an investor.

People who want to own property have to make a calculated decision about when to buy. Obviously, there are lots of things that go into your decision-making, but let’s chat about something very important: the condition of the real estate market. Continue reading

Panelists Share Experiences with Creative Real Estate Investing – plus Q & A

Podcast Episode 123: “Creative Real Estate Investors Panel.”

Special one-hour dive into the trenches of Creative Real Estate in Canada… and Africa! Barry has gathered a panel of experts, veritable rockstars of Creative Strategies, to share their experiences and answer questions from the audience. 

The essence of Creative Real Estate Investing is knowing strategies and recognizing opportunities. Sometimes deals come along that don’t work for your usual approach. Knowing alternative strategies like Agreements for Sale or Rent-to-Own (a.k.a. Lease Options) allows you still to turn a profit.

For many investors, Creative Strategies are a supplement to regular Buy & Hold—but they can also become a full-time real estate business. Listen now to get insight into how a bit of creativity opens up all kinds of opportunities!

Download the audio file HERE.
(control click or right click + save as)

Register now for Barry’s Rapid Cash Program!
Next event: Toronto, ON, Canada on June 1–2, 2019
http://rapidcashprogram.ca/

“Be creative” image by Ramdlon used under CC0 Public Domain. 

Protect Property Against Flooding

image of flooded residential street in Montreal

Podcast Episode 122: “Water Is Coming”: Climate Change Preparedness for Homeowners and Real Estate Investors.

Damaging floods are on the rise, whether as sewer backups, swollen rivers and lakes, rising ocean levels, or overland flooding. As a result, water related insurance claims have been rising, triggering changes to policies and premiums. If you own property—and especially property with a basement—it’s time to re-evaluate your preparedness. This blog post considers climate change and what it means for Canadian homeowners and real estate investors in terms of maintenance, prevention, and insurance against water damage from flooding.

Download the audio file HERE.
Read a written version below or download the handout HERE.
(control click or right click + save as)
  Continue reading

Real Estate Investing Workshops: Edmonton and Toronto

house and cash

How to Make Quick Money in Canada with Creative Real Estate Investing.

So, you want to be a real estate investor. But financing is a problem, so you’re not sure about getting started or whether you can continue investing.

You might feel like you don’t have the money to buy now, or you want to purchase real estate with little-to-no money down. Maybe you already own some investment properties, and you can’t qualify for more mortgages. Or maybe you have the financing to purchase investment properties, but “buy and hold” takes too long to pay off. Perhaps you’re frustrated by finding great deals on houses that don’t fit your current investing strategy.

Barry McGuire’s Rapid Cash Program shows you how to overcome barriers and become a successful real estate investor. The secret is a portfolio of proven Creative Strategies, tailored for the Canadian market. If you understand the strategies, you’ll recognize the opportunities! Continue reading

Subdividing Property to Increase Density Can Raise Issues with Mortgages on Titles

Skinny House

Podcast Episode 121: “Subdivision Nightmare.”

Across Canada, there is an ongoing discussion about the lack of affordable housing. In some areas, developers won’t build rentals because building condos is more lucrative, because there are rent controls, or perhaps a combination of both situations. Some Canadians are completely priced out of the housing market—especially in the Great Toronto Area and the Lower Mainland of British Columbia. Even in Alberta, where I live and work as a real estate lawyer, affordable housing is an issue. One solution is increased urban density. This podcast/blog post is about the legal challenges of subdividing a single lot into two or more skinnier properties. If there is a mortgage on title, watch out!
 

Download the audio file HERE. Download the handout HERE. (control click or right click + save as)
  Continue reading

Rapid Cash Program Webinar

Join our webinar on April 18th to learn about our upcoming real estate investing workshops in Edmonton and Toronto. The Rapid Cash Program will teach you creative strategies that can work in any real estate cycle to generate income and grow your portfolio. You’ll learn the secrets behind Canada-specific quick-turn strategies that will put you on the pathway to investment success!