Personal Investor: Rental income is taxable — even for Airbnb
Airbnb has sent notices to its 80,000 hosts in Canada to remind them that any income from home sharing is considered rental income by the Canada Revenue Agency.
That means it was taxed like any other rental income in 2017 and any income generated by home sharing must reported when you file your return this spring. You’ll need to include it in Form T776, but if you have a day job it will be added to your employment income and, depending on the total amount, probably be taxed in a high bracket.
Fortunately, you can lower your taxable amount by deducting expenses relating to your rental business. If the property is your principal residence, deductions can be a portion of the expenses you are paying for anyway including mortgage interest, property taxes, insurance, repairs and maintenance, landscaping, utilities, and depreciation on fixed assets like furniture, computers, or even your car.
You can claim the full cost of advertising expenses, office costs, professional fees, management fees, salaries or wages, and travel costs.
If the rental property is not your principal residence, you can even claim depreciation on the property itself.
However, if it is your principal residence, claiming depreciation on the entire property could jeopardize your principal residence capital gains tax exemption. If that happens, the CRA could force you to pay taxes on the appreciation of your home when it is sold.
WaterStreet Family Offices' tax expert Tim Cestnick from has a checklist to ensure your principal residence remains principal:
1) The partial use of the residence for income-producing purposes is ancillary to the main use as a residence (i.e. beware of renting out more than half of the property);
2) There is no structural change to the property, and
3) Capital cost allowance - that is, depreciation for tax purposes - has not been claimed on the property.
Also, remember to keep all records.