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Canada primary residence and capital gains rules

hosting

#1

Hi I am a 2 year Air BnB host in Ontario, and love everything about it. I always declare my income and pay all taxes on what I earn from the room I rent out.
My wife and I live in the house, rent a spare room and are always (90+%) present when folks stay.
Now my tax guy is scaring the living daylights out off me by saying that ANY income from my house changes the status of my home as Primary residence and that I could be liable for a HUGE tax bill through Capital Gains.
Can anyone shed some light on the rules, as my wife and I are scared to do the wrong thing - but cant believe that all my fellow AirBnB hosts continue to operate if this is the case.

Grateful for ANY help and references! Thanks Jon


#2

You are commercially renting out your home and making money out of it.
It is the same in Australia. I know of a couple in Sydney who made $30000 and when they sold their home guess what the tax on the sale was…$30000, they hadn’t looked into losing the exemption and her words “I worked for free!”


#3

I have no idea what the tax rules are in Canada but a couple of things come to mind for the uk.
You might have similar relief schemes
If your one letting room represents 10% of the area of your home, you only pay CG tax on 10% of the uplift in your homes value.
If you bought the house for £300,000 and sold it for £500,000 = £200,000 profit
10% of £200.000 profit is £20,000 which would be offset by a couples annual CG tax allowance of £11,000 each in the uk
Also in the uk we have “letting relief” for B&Bs, a jointly owned property would get about £80,000 of capital gains relief.
I think you need to inquire direct to your tax office, its a tricky subject.


#4

Blimey! In the UK we get a ‘Rent a Room’ scheme tax break of 7K for renting a room in your own home. A housing crisis and expensive to maintain housing stock brings that about I guess.
3+ rooms is classed as an official B&B, you can go under the radar with fewer (just list profits on your tax return). Mortgage companies insist on a certain percentage being occupied by the family, but 1 guest room would be fine. Interesting how countries differ. Get another accountant opinion.


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