Short Term Rentals are not Tax-Free

Are you renting your property or part of it on AirBnB, VRBO or HomeAway? Well, the income you earned is taxable and has to be reported on your tax return.

Short Term Renting is renting of residential property to a guest for a short length of time. Let’s discuss how this works:

Rental Income:

Any income generated through short term rentals constitutes rental income. Just like conventional rental income, a “Statement of Real Estate Rental” – T778 needs to be completed with the tax return to be compliant with Canada Revenue Agency. But that’s not all. There are other requirements unique to Short Term Rentals

GST/HST Requirements-

Short term rentals started out as a part time renting of the extra room to generate some cash. They have evolved as a business today. Some people have gone on to purchase properties for the sole purpose of short term renting. While it depends how good the occupancy rate you have and what is the average cost you charge for your property, numbers can add up quickly, and short-term rental owners are required to have a GST number and be GST compliant if they generate a revenue greater than $30,000. This includes the gross amount of rental income generated and includes all fees and other charges that home owners are required to pay to the AirBNB and HomeAway for their services.

City Requirements

Housing affordability is a major issue in major Canadian cities and short-term rentals don’t help the cause. They take away from the housing supply that could have catered to long term rentals for individuals and families. So, all city governments are coming up with stringent laws for short term renting and all home owners are advised to be compliant with City bylaws as well.

Claiming Expenses

As mentioned earlier, short term rental income counts as rental income and therefore a property owner can claim all the expenses that a conventional rental income owner does. These expenses include mortgage interest, utilities paid, maintenance costs and other costs relating to renting the property. However, some of the costs are very unique to short term rentals. These include the service fee charged by the service providers like AirBnB and HomeAway, cleaning costs, advertising costs and other related costs. A short-term rental owner can claim all these costs.

Claiming expenses can be tricky and complicated as they might have to prorated if you are renting only part of the property. Also, any expense claimed must be expense made to generate rental income. At Softron, we have studied the short-term rental market in detail and can help you in being fully compliant with Canada Revenue Agency for your short-term rental income.

Call 905-273-4444 and let the best handle your taxes!

Did you ride the bitcoin wave in 2017? Time to pay taxes

The digital currencies have emerged as a new asset class in 2017. While they have been around for a few years, the gains in the value of digital currencies were spectacular in 2017. Also, the number of digital currencies has increased manifold. It’s not just about bitcoin. A new crypto currency is being launched almost daily. Ethereum, Litecoin, Ripple are few prominent ones.

Having said that, a lot of people made money by trading crypto currencies in 2017 and now it’s time to pay their taxes. We discuss the following situations where you will be liable to pay taxes:

Buying and Selling Cryptocurrencies

  • If you bought a cryptocurrency with Canadian Dollars and sold it at a profit in Canadian Dollars, this transaction will need to be reported as capital gain
  • If you complete these transactions in US dollars, all transactions need to be converted in US dollars and gain/loss will be reported on your tax return

Trading Within Cryptocurrencies

As mentioned earlier, there is a plethora of cryptocurrencies available today. But not all currencies can be bought with CAD or USD as this is how the crypto currency exchanges are set up at this time.

When one crypto currency is used to purchase another currency, barter transaction rules apply for such transactions. So, you will need to know the cost of purchase in CAD for such transactions. Let’s assume you bought 10 ethers for 1 bitcoin. The transaction will be recorded as price of 10 ethers in CAD. We will also need to know the price of 10 ethers in CAD at the time of sale to determine whether profit was made in this transaction or loss.

Purchasing with Crypto

Well, it’s a currency after all and the purpose of the currency is to exchange it for products and services. The barter transaction rules apply here as well. So, if you buy a digital coin for $10.00. Its value increases to $20.00 and then you end up buying a USB drive online by paying that one digital coin. The CAD value of the USB drive is $20.00. In this case, the purchase of USB transaction will have to be reported and a tax will be paid on the increased value of digital coin.

As described above, the transactions can be really complicated and confusing. Also, there is lack of proper reporting statements from the informal exchanges where these currencies are traded. Currency conversions also add to the complication. We at Softron have been studying the tax implications related to Crypto currencies and understand the digital currency market.

Call 905-273-4444 today and let the best handle your taxes!