Many homeowners are making some extra income by listing their suite or home on short-term vacation rental sites like Airbnb or VRBO. If this is you, read on to find out some important tax tips for your vacation rental income!
- Determine if you have to charge GST – Most residential rentals are not GST taxable, but some short-term vacation rentals are taxable. GST must be charged on a residential rental when ALL of the terms below are met:
- The period of occupancy is less than 1 month to the same individual
- The consideration for the rental is $20 per day or more
- The total income over the year is $30,000 or more and so the owner does not qualify for the small supplier GST exemption
If you can say YES to the above three conditions, you are required by law to register for, collect, and remit GST. The good news is that you can claim back the GST you paid on expenses so make sure to keep those receipts! If you need help, Coastal Tax can set up a GST account for you, do the bookkeeping, and file the remittances.
- Rental or Business Income – You will need to determine if your vacation rental qualifies as rental income or business income. This affects the deductions that you can claim. For example, home office expenses can be claimed on business income.
“In most cases, you are earning income from property if you rent space and provide basic services only. Basic services include heat, light, parking, and laundry facilities. If you provide additional services to tenants, such as cleaning, security, and meals, you may be carrying on a business. The more services you provide, the greater the chance that your rental operation is a business.” (CRA Source)
- Claim Expenses – An expense is deductible if it was necessary to earn income. You should keep all receipts or have a hand-written receipt made up if the supplier doesn’t already have one. Here are the basic categories of expenses for Rental Income:
- Interest – On a mortgage or loan
- Office expenses
- Legal, accounting, and other professional fees
- Management and administration fees – Strata fees or Property Management
- Maintenance and repairs – Soap, towels, linens, cleaning supplies, lightbulbs, appliance repair, painting, replace flooring, etc.
- Property taxes
- Travel – Flights, ferry, hotel, and meals if you had to travel to the unit for maintenance or another related reason.
- Motor vehicle expenses – I recommend keeping a mileage logbook for business use of your personal vehicle. Details should include date, destination, round-trip km, and reason for trip.
- Other expenses – For example, housekeeping service, landscaping, security, etc.
For more information on GST taxable rentals and situational examples, see http://www.cra-arc.gc.ca/E/pub/gm/19-2-2/19-2-2r-e.html.
Until next time!
-Alicia Loewen, Coastal Tax