Did you receive income for a short-term rental after 2023?

If you rented out a residential property for short periods, these changes may affect you.

Changes to rules for eligible deductions from short-term rental income

What is a Short Term Rental?

A short-term rental is a residential property that is rented or offered for rent for a period of less than 90 consecutive days.

What is a residential property?

A residential property is all or any part of a house, apartment, condominium unit, cottage, mobile home, trailer, houseboat or other property, located in Canada, which can be used for residential purposes under the applicable laws of the province or municipality where the property is located. 

What is a non-compliant short-term rental?

A non-compliant short-term rental, is a short-term rental that:

• is located in a province or municipality that does not permit short-term rentals to operate at that location; or

• does not comply with all applicable provincial or municipal registration, licensing and permit requirements for operating a short-term rental.  

Expenses & Write-offs

When calculating a taxpayer’s income from a business or property, the Income Tax Act generally permits the taxpayer to deduct reasonable current expenses incurred in the ordinary course of earning that income. 

However, when calculating income earned from a short-term rental for a tax year after 2023, the new income tax rules do not allow the deduction of a non-compliant amount.

For more information on deductible expenses, go to Rental expenses you can deduct for short term rentals in Canada.

Books and records 

Taxpayers must maintain accurate books and records to report rental income and to claim eligible expenses. This includes documentation confirming that the residential property was located in a province or municipality that permits the operation of short-term rentals and that the rental of the property complied with all provincial and municipal registration, licensing and permit requirements for operating the short-term rental. 

The CRA may conduct audits or reviews to verify the accuracy of the income and deductions reported by taxpayers on their returns to ensure the deductions are permitted under the new rules. 

Source: For more information on this change read on Canada.ca CRA here