Effective January 1, 2024, CRA will deny rental expenses claimed against rental income that are from non-compliant short-term rentals. You have short-term rental income if you rent any portion of your home for less than 90 consecutive days to a tenant. The short-term rental is non-compliant if the municipality where the home is located does not permit short term rentals. Some municipalities allow short term rentals with certain regulations that require registration, license or permit, and collection of certain municipal taxes. If you do not comply with these regulations, then it is non-compliant.
For the first year, 2024, if you become compliant by December 31, 2024, then CRA will consider that you have been compliant throughout the year.
Therefore, it is extremely important: first, to determine whether your rental income is short-term (less than 90 consecutive days to a tenant). Then, check with the municipality if short-term rental is permitted. If permitted, then what are the requirements in terms of registrations, licenses, permits, municipal taxes. Make sure to become compliant before January 1, 2025.
If a property is used primarily (more than 90%) for short-term rentals, CRA could consider it to be a commercial property. Which means the property will become GST/HST taxable and subject to GST/HST on sale. You need to be aware as this could happen when you switch from long-term rental to short-term rental of the property.
If your short-term rental income totals more than $30,000 a year, then you will have to register for and collect GST/HST on the rental income.
The above information is of a general nature only and should not be relied upon for specific situations. Call Marlies Y Hendricks, CPA at 416-766-3941 or submit email enquiry form below to set up a consultation.
