This forum is dedicated to connecting hosts with other hosts. Sign up to get the latest updates and news just for AirBnb hosts! Note that we are not affiliated with Airbnb - we are just passionate hosts!
Governments all over the world watch each other to see how other jurisdictions are regulating (or not) short term rentals.
Beginning today (Jan 1/24) the Canadian federal government no longer allows an income-tax write-off for business expenses incurred for short-term-rentals that are non-compliant with local regulations
Eliminating short-term rental deductions
The elimination of some short-term rental deductions was announced in the Fall Economic Statement (FES) and kicks in on Jan. 1.
When the federal government announced this change, it justified the move by saying that in Montreal, Toronto and Vancouver in 2020, there were almost 19,000 homes being operated as short-term rentals that could be used for permanent housing.
To encourage owners to return those units to the long-term rental market, some municipalities imposed bans on short-term rentals, while others applied restrictions on how they operate. Despite the bans and restrictions, some owners continued to rent out these properties.
“In this circumstance, where the province or municipality has banned rentals in certain areas – yes, they are banned [but] if you continue to do those activities, the federal government [said] … you must pay tax on them,” said Ameer Abdulla, a partner with EY Private.
The federal government is now eliminating that tax break, denying operators of short-term rentals any income tax deductions for expenses if they operate in provinces or municipalities that have banned short-term rentals.
In provinces that still allow short-term rentals, operators that are not compliant with local regulations and laws will also be denied the deduction.
“This is just the federal government laying on another disincentive to that existing framework,” Abdulla said.
In British Columbia cities if the address of the STR property is different from principal residence it is, by definition, out of compliance. Catching THAT should be pretty easy with a few lines of code.
This is excellent legislation. Those of us who have STR’s that are compliant with local regulations should not have to compete with rogue businesses. We pay our taxes, make sure our STR is up to business and construction codes, etc… Competing against an STR that flaunts the rules put us in an unfair position.
And how they will know an STR from rentals that are more than 30 days? I guess they will start with requiring Airbnb and VRBO etc to give them the properties contact information that are listed on their platforms.
If the regulations are truly aimed at health and safety issues for STRs then compliance would be good all around. However many of the municipal rules are not actually directed at health and safety compliance. They are directed at limiting STRs for other reasons.
And how they will know an STR from rentals that are more than 30 days? I
Existing legislation already gives the government access to Airbnb data because Airbnb collects a “hotel tax” on behalf of government and then remits same to gov.
And there are often good reasons for limiting strs. Unavailability of affordable long-term rentals for locals, entire home “remote host” str rentals that disturb the neighbors, family-oriented neighborhoods suddenly experiencing a constant stream of strangers coming and going, etc.
And those governments in Canada (municipal, provincial and – now – federal) make no secret of their policy agenda. I have never heard them refer to “health and safety” compliance
Not rocket science but quite a task for the CRA, a federal body, which would have to identify properties by municipality and ensure that the particular municipal rules aren’t being complied with. I guess that Deb’s question about how many people they will have to hire to monitor compliance is a good question. Each municipality is setting up their own rules with significant differences.
There may be good reasons but municipal government authority to pass regulations is limited by statute. Their main area of authority is to address health and safety.
The municipalities will get info from Airbnb where they can I guess and then this would be reported to CRA? That sort of cooperation is a challenge in itself let alone how to identify the CRA taxpayer that is connected to the Airbnb property
I’m not clear what that hotel tax is as not all municipalities have applied a hotel tax. They are collecting sales tax now whether the str owner is obliged to or not.
If you are claiming deductions on a rental property you need to list the legal address of that property. It is a simple matter for the federal tax agency to ask if that rental income is derived from a short-term rental platform, and then computer-cross-check that against whether the property is in a municipal jurisdiction where non-owner-occupied STR is prohibited.
They can also computer cross check against Airbnb remissions for occupancy tax remission to government
People can lie about a lot of things on their income tax forms (not just STR), but when they do so they cross the line into income tax fraud and the associated penalties, and that risk discourages people from cheating, and encourages them to make decisions (i.e. putting a STR property back into the LTR rental pool) that bring the taxpayer into compliance
Linking the specific taxpayer to the property is the issue. And who is going to do that? It’s not so simple as a computer search.
I think they will focus on certain large municipalities and catch the easy to identify taxpayers but it is still quite a challenge for an organization that can’t handle the existing work.
Debthecat