Airbnb Taxes in Canada: What Hosts Need to Know

If you’re considering turning your home in Canada into an Airbnb, you need to understand tax requirements that may apply to you as you start hosting. Filing and paying Airbnb taxes in Canada are your responsibility, and remaining tax compliant is vital to ensuring your STR business’s success.

Taxes can be tricky, so in this article, we’ll discuss tax implications associated with operating an Airbnb in Canada. We’ll explore the types of Airbnb income tax, tax reporting, deductible expenses, and GST/HST considerations.

Note that this article is not comprehensive or intended to be legal advice. If you have any questions about your local tax obligations, we recommend you seek advice from a tax professional.

What Are Airbnb Taxes in Canada?

If you provide short-term accommodation in Canada, you should ensure you understand each of the following types of taxes and pay those that apply to you: income and sales tax.

All income you get from renting out your property short-term on sites like Airbnb or Vrbo or your own direct booking website is subject to income tax and should be declared. However, the good news is that you can claim and deduct any reasonable expenses you incur to earn income from your Airbnb property.

That means you must keep detailed records of your income and expenses related to running Airbnb and keep all your receipts. You should keep all of your Airbnb-related information together to make tax time much easier and less stressful. If you use Hospitable as your vacation rental software, you will have all the booking information at your fingertips.

Canadian sales taxes vary across provincial/territorial, and sometimes local, jurisdictions. Most goods and services supplied in Canada, including short-term accommodation, are subject to the Goods and Services Tax/Harmonized Sales Tax (GST/HST). Quebec sales tax (QST) is similar to the GST/HST but applies to the short-term accommodation provided in Quebec.

Hosts who earn more than $30,000 in gross revenue over four calendar quarters must register for the GST/HST and are responsible for collecting and remitting the GST/HST to the Canada Revenue Agency (CRA). Hosts with Airbnb listings who aren’t registered are not obligated to collect and remit the GST, HST, and/or QST on their accommodation themselves.

According to the rules for digital economy businesses that took effect on July 1, 2021, booking platforms like Airbnb must collect and remit these taxes to the CRA. You can find more information about the taxes that Airbnb collects and remits in Canada on the Airbnb website.

Airbnb also offers a free tax guide covering general tax information in Canada (available in English and French). You can find a link to this guide on the Responsible Hosting in Canada webpage.

Types of Airbnb Income Tax in Canada

Remember that the CRA may consider the Airbnb income to be either rental income from a property (passive income) or self-employment business income. The type of Airbnb income affects how you report it on your tax return in Canada. You should consider the number and types of services you provide for your guests to determine which type of Airbnb income you have.

• If you just rent space and provide only basic services such as electricity, laundry facilities, parking, and heat, the CRA will consider your Airbnb income property income.
• If you also provide additional services to your guests, such as meals, security, and cleaning, your Airbnb income may be considered self-employment business income.

Although it’s not always clear, the more services you offer to your guests, the greater the chance that income from your Airbnb is considered business income.

The Government of Canada sets the federal income tax rates for individuals, and each province and territory determines its own income tax rates. The provincial or territorial income tax applies additionally to the federal income tax.

It’s also important to remember that Canadian income tax rates are subject to frequent adjustments. You can find current personal income tax rates for all provinces and territories on the federal government website. 

You may be able to deduct certain reasonable expenses incurred to earn rental income from your short-term rental, including insurance, property taxes, utilities, repairs and maintenance, etc. For example, if you don’t want to clean your property yourself, you may hire professional vacation rental cleaners and claim the costs of cleaning services. And if you opt for vacation rental software like Hospitable, you can set rules, and our system will automatically assign tasks to your cleaners.

Taking advantage of deductions can help you reduce your taxable income. But you should remember that if you rent out only a room in your house, you can claim only the expenses that relate to the rented part of your property.

Airbnb Tax Reporting in Canada

The Canadian tax system is a self-assessment system, so it’s your responsibility to determine your own liability for income taxes and file the required returns. You are required to report your Airbnb income, whether you rent out your property regularly or only occasionally.

If your Airbnb income is considered rental income from property, you must report it on your income tax and benefit return and file Form T776, Statement of Real Estate Rentals.

Suppose the income you get from running Airbnb in Canada is considered self-employment business income. In that case, you must report it on your income tax and benefit return and file Form T2125, Statement of Business or Professional Activities.

Complying with Airbnb income tax regulations in Canada is crucial for hosts. By properly reporting your Airbnb income in Canada and paying taxes on time, you’ll avoid penalties and unnecessary tax burdens and will be able to enjoy all the benefits of owning an Airbnb.