We all know that the Canadian taxation system is not the easiest to navigate. In fact, it can be an absolute headache working out your tax return. So, before we get started on sharing our knowledge, we would like to stress that we are not taxation professionals. You should always seek out independent advice, as everyone’s circumstances are different. Now you know that, let’s get down to the nitty-gritty!
First up, income declaration.
Rental income is the money you earn from renting a house, apartment, or room that you own (or co-own with someone else). For tax purposes, you will need to decide if the income you receive is classified as property income, or business income. If you just provide the basic services such as heat, light, and parking, then in most cases this would likely be classified as rental income. However, if you provide more services as part of the rental fee, then you may need to classify your earnings as business income. Here is a useful link to the CRA website to help you decide. Once you have decided on which type of income you are declaring, you then need to deduct your expenses.
Income Top Tip! Your classification of income is important as it has implications to your overall tax return. Ensure you get this right according to your circumstances.
It is worth stressing that there are some expenses that you can deduct for tax purposes, and some that you can’t. In short, anything that contributes to the running of the rental is typically considered an expense that you can deduct for tax purposes. Some examples are:
- Beyondbnb fees,
- Airbnb fees,
- repairs and maintenance,
- and even utility costs if these are included with your rental fees.
As you can imagine the full list is quite extensive. So, to help you out, the CRA have some really useful information on what you can, and can’t deduct, click here to go to their information. Then you have the more complex expenses such as capital cost allowance (CCA), which is an expense relating to property that depreciates in value over time: think furniture, equipment, or the building itself. Again, the CRA have a plethora of information on the most common types of rental properties and their CCA classes, just click here to view.
Expenses Top Tip! Did you know that if you need to visit your property to check it over, you are able to claim the travel expenses incurred (not boarding or food, just fuel)? It’s worth keeping a tally of these journeys so you can claim at year end.
Did you see the email we sent back in January? If not go check your inbox. This email gives you loads of information and links that you will need when working on your tax return. You will have links to all your invoices along with Wave and Stripe reports. If you need any assistance, please do not hesitate to reach out to us.
GST, PST, and MRDT.
If you want to find out more on how GST, PST and MRDT are collected and remitted by Airbnb, they have a great article on this, just click here: we highly recommend that you use these Airbnb services as it saves a lot of time and stress. In summary, if you are not personally registered for GST or PST in Canada, then Airbnb is now legally obliged to collect and remit on your behalf (new for 2022). Consequently, if you do sort your own tax collections, just make sure you tell Airbnb, so, your guests don’t get double taxed. Currently in BC the following rates apply:
- GST is currently 5%,
- PST is currently 8% and is calculated including the cleaning fees,
- MRDT is currently 2-3% and is charged on rentals of less than 26 nights.
Now comes the big question about GST. Do you have to charge it? Yes, and no depending on your circumstances! Basically, when your rental income exceeds $30,000 over four consecutive quarters then you must be charging GST (be careful, this does not mean January to December). However, according to the CRA you can voluntarily register for GST before you reach this threshold. You may be wondering why, and there could be several benefits if you do. It is best to seek independent tax advice on this matter. If you want to read more, here is some further reading for you.
- Another great article on reporting Airbnb income from Turbotax.intuit.ca, just click here.
- Airbnb has a comprehensive article on tax considerations on short term rentals, just click here.
- We also recommending that you log into your Airbnb account to check your financial setup.
Now, we know this isn’t everything you need to know, but hopefully you have enough information to understand that little bit more.
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