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.

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. 

FAQ: Do I Really Need an Alberta Real Estate Lawyer When Buying or Selling My Home?

If You’re Getting a Mortgage or Have an Existing Mortgage, Then You Need a Lawyer to Buy or Sell a Home in Alberta.

The legal requirements surrounding mortgages in Alberta demand a lawyer, but an attorney protects your interests and manages many important details in a real estate transaction. Once you have a Purchase Contract, it’s time to get a lawyer, however it can help to have one much earlier in the process to make sure things go smoothly. Below is a list of all the things that my Edmonton law firm, RMLO Law LLP, takes care of so that our clients can focus on getting ready to change homes. As you’ll see, there’s a lot to do, which is why the process takes time. Buying and selling are bit different, but they both take time. The end of this blog post also has a bunch of frequently asked questions.

Continue reading

Selling Homes in Alberta and Real Property Reports

What the Heck Is a Real Property Report and Why Should I Care?

In the Province of Alberta, a Real Property Report (RPR) is a required part of the standard Multiple Listing Service (MLS) real estate purchase sales contract. It is a document that was formerly called a Land Survey because a professional group known as the Alberta Land Surveyors’ Association produces it. Continue reading

How to Pick a Lawyer for Mortgages, Refinancing, and Buying or Selling a Home

Why Use a Real Estate Lawyer for My House Purchase or Sale?

Here’s the scenario. When we get a new Alberta real estate transaction sent to us here at RMLO Law LLP in Edmonton, I take a look at what lawyer/law firm is representing the other party. Normally it’s a law firm that does a lot of real estate. Great, that means that we will be working with somebody who understands how real estate works with respect to timing, documentation, and nuances of this legal specialty. What I hate to see is if the law firm is better known for their expertise in other legal specialties, such as divorce law or litigation.

Yes, we are all lawyers but it’s an age of specialization. Continue reading