Thinking of Buying an Investment Property? Many of our clients are thinking the same way, too! Let’s get some of your top questions answered.
Are you considering diversifying your portfolio in times of financial market volatility? If so, you may join the thousands of Canadians who have entered the real estate market and rented their investment properties through Airbnb, VRBO and other online platforms. Before you join the growing industry, there are some tax and GST considerations that affect the finances of host property owner.
The number one question asked at our firm is “Do I need to charge GST on my Airbnb”?
Your Airbnb rental income may be subject to GST. This is because short term residential rentals for periods less than 30 continuous days are taxable for GST purposes. Long term residential rentals are GST exempt.
TIP — It is also important to understand your municipal or city bylaws. For example, the city of Edmonton is currently discussing charging a tourism tax similar to that of hotels. Your city or municipality may already have the tourism tax or a similar tax that is required to be remitted.
How to claim Airbnb expenses:
There are two expense categories that will be incurred as an Airbnb rental;
- Current expenses
- Capital expenses
Current Expenses are ongoing expenses throughout a period of time and do not provide a lasting benefit. These expenses include:
- Mortgage interest
- Cleaning costs
- Property taxes
- Condos fees
- Repairs and maintenance
- House insurance
- Travel *TIP (if you manage more than one property, travel expenses are eligible deductions against rental income)
Capital Expenses made to your property that make it suitable for rent or repairs that extend the useful life or improve your property to the extent that it is better than its original state are usually consider capital. Capital expenses are subject to CCA which reduces the amount that is deductible in the year the expense is incurred but rather expensed over a period of time.
For more information on getting your taxes in order when renting out a property, contact our office and speak to one of our trusted Chartered Professional Accountants, we are happy to assist!