Short-term rentals can be a great income stream—but the tax rules are not “set-and-forget.” If you host on Airbnb (or similar platforms) in Canada, here’s a clear, no-jargon guide to staying compliant and keeping more of what you earn.
1) It’s taxable income
Money you earn from hosting is rental or business income and must be reported on your personal tax return (usually Form T776 – Statement of Real Estate Rentals). If you provide hotel-like services (frequent cleaning, meals, concierge), the CRA may treat it as business income, which changes how expenses and CPP apply.
Tip: Keep separate records (and ideally a separate bank account) for your hosting activity.
2) Deduct your reasonable expenses
You can deduct expenses that are reasonable and directly connected to earning that income. Common deductions include:
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Mortgage interest (not principal), property taxes, insurance
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Utilities, internet, cleaning supplies, repairs and maintenance
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Platform/service fees and advertising
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Condo fees and licensing/permit costs
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A portion of home expenses if you rent part of your home
If you rent only a portion of your home, claim expenses pro-rata (e.g., square footage and days rented). Keep invoices and calendars to support your calculation.
3) Capital Cost Allowance (CCA)
CCA (tax depreciation) may be claimed on furniture, appliances, and even the building. However, claiming CCA on the building can reduce your principal residence exemption when you sell and may trigger recapture later. It’s often best to limit CCA to furnishings—or skip CCA entirely—until you’ve had professional advice.
4) GST/HST and local taxes
Canada treats short-term accommodation as a taxable supply. Key points:
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If your worldwide taxable sales exceed $30,000 over four consecutive calendar quarters, you generally must register for GST/HST, charge the right rate, and file returns.
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Some platforms may collect/remit part of the sales tax on bookings; that does not automatically remove your filing obligations if you meet the registration threshold or make other taxable sales (e.g., consulting).
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Many municipalities require a short-term rental license and charge a Municipal Accommodation Tax (MAT). Check your local rules (e.g., Port Perry/Scugog/Toronto have their own requirements).
5) Change-of-use & principal residence
Renting out your home (or a suite) can affect the principal residence exemption. Long-term or exclusive rental use can create a change of use with potential capital gains tax. There are elections (like 45(2)/45(3)) that may help in certain situations—talk to a pro before a big shift in use.
6) Non-residents hosting in Canada
If you’re a non-resident for tax purposes, Canadian rental income is subject to Part XIII withholding and/or Section 216 filing options. The structure matters—get specific advice to keep withholdings and compliance smooth.
7) Deadlines & records
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T1 return: April 30 (June 15 if you have business income; any balance still due April 30).
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Keep detailed records: invoices, receipts, booking statements, calendars, and mileage logs for supply runs.
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Save platform year-end summaries—they’re helpful but not a complete set of records.
8) Make it easy on yourself
A simple system—separate account, monthly spreadsheet or QuickBooks, and a folder for receipts—will save you stress and money at tax time.
