Federal Tax Reforms Targeting Short-Term Rentals

The federal government has announced tax policy changes that will crack down on short-term rentals such as AirBnb and Vrbo properties, with the goal of expanding the long-term rental supply nationwide.

The federal government will no longer allow short-term rentals to claim income tax deductions on rental expenses for their short-stay properties in regions where short-term rental restrictions are in place.

These new taxation rules are intended to support provincial regulations around short-term rentals. Short-term rental properties will need to be registered in order to benefit from any tax break.

Furthermore, income tax deductions will be denied when short-term rental operators are not compliant with the applicable provincial or municipal licensing, permitting, or registration requirements.

For example, under this new regulatory change, a short-term rental that earns $120,000 in income, with $120,000 in expenses, would now have to pay $33,000 in federal taxes.
These changes will come into effect January 1st, 2024 and the Federal government estimates there are tens of thousands of short-term rentals that could be made available as family homes, addressing the ongoing housing crisis in Canada.

For more information, you can review the “Supporting Renters, Buyers, and Homeowners” section, located in Chapter 1 of the government’s newly released 2023 Fall Economic Statement.