The CRA may come a knocking. With over 55,000 Canadian AirBNB hosts it is not surprising that the 2017 federal budget allocated over half a billion dollars at ramping up their resources to go after tax evaders and new economy revenue streams.
Hosts have been using short-term rentals to bring in additional income and some of them have not been declaring that income or paying taxes on it. This is a form of tax evasion that is an easy one for CRA to go after and which will produce significant tax revenues. AirBNB has already sent emails to its hosts reminding them to declare their incomes. If you’re one of the hosts that has not declared your income, starting to declare it moving forward won’t absolve you of the past. If the CRA obtains the data from AirBNB they will know you history. Fortunately, the CRA has a voluntary disclosure program that can help improve the situation for you, but may k eep you on their radar.
According to the MetroNews Vancouver, in a survey 10% of Vancouver property owners listed a short-term rental in the last year at least once. According to AirBNB, “A typical host in Vancouver earns $6,600 from an average of 58 nights per year.
The best way to proceed is to treat your AirBNB as a business. This includes making sure you have appropriate insurance coverage in case of damage or liability and also keeping track of your expenses, which can be deducted against your income. In most cases, you may be able to deduct, advertising costs, cleaning costs, portion of mortgage interest, heating, electricity and utilities expenses, as well as, repairs and maintenance directly associated with the space being rented. If you had to renovate your home to allow for AirBNB, then you may also be able to amortize those expenditures directly associated with the space, or making it possible for the space being rented.