Loading Website ...
Loading Website ...
You may be impacted by tax legislation changes for 2024 and future years which target non-compliant short-term rental properties by denying all expense deductions for income tax purposes.
Further, owners should be aware that discontinuing short-term rental use may immediately trigger the need to pay GST on the property’s fair market value.
History – BC’s restriction on short-term rentals
Effective May 1, 2024, new restrictions were implemented for short-term rentals in British Columbia, defined as stays of less than 90 consecutive days. In many areas, these rentals are now only allowed if they take place within an owner’s principal residence, and the necessary licenses have been obtained. Additionally, some regional governments have introduced significantly higher fines for non-compliant rentals.
Certain resort and rural communities are exempt from the principal residence requirement. To determine the status of your property, refer to the interpretive map available at the link below or contact our office.
New tax legislation for non-compliant short-term rentals
New tax legislation has been introduced which applies to individuals, corporations and trusts operating short-term rentals of residential property that are non-compliant.
Residential property includes all types of residential rental establishments. Short-term is less than 90 consecutive days.
What is a non-compliant short-term rental?
Short-term rental operations will be considered non-compliant if they meet any of the following criteria outlined by the Canada Revenue Agency (the “CRA”):
Denial of expenses
Effective January 1, 2024, all income tax deductions for rental expenses will be denied if the rental operation is non-compliant. Where the operation was non-compliant for only part of the year, the expenses would be pro-rated. The CRA will assess income tax on the gross rental income, less any pro-rated allowable expenses.
Grace period for 2024 calendar year
A property that becomes compliant by December 31, 2024, will be considered compliant for the entire calendar year. This transitional measure applies only for 2024.
Rental platform reporting to Canada Revenue Agency
The CRA has the ability to obtain information on the revenue you have earned directly from the short-term rental platform such as Airbnb or Vrbo. Please ensure all income is disclosed in your tax return to avoid penalties and interest.
Take action before December 31, 2024
Hosts and operators should confirm the compliance of their short-term rental operation prior to December 31, 2024, to ensure deductibility of your rental expenses on your tax return. Please also ensure you have complete records of your gross rental income, together with rental platform reports for the year, and all supporting documents for expenses.
GST implications
With the recent restrictions to short-term rental properties in BC, some owners may be re-evaluating how they use their short-term rental properties.
Owners might choose to sell their short-term rental property, transition to long-term rentals or convert the property to personal use. In any of these scenarios, GST implications must be considered. Typically, the sale of a property previously used for short-term rentals is subject to GST. Furthermore, converting a property from short-term rental use to either long-term or personal use may require the owner to self-assess and pay the GST based on the property’s fair market value at the time of the conversion.
We can help
Please reach out to us and we are happy to assist you in navigating these changes and determining any GST implications from changing the use of your property.
The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.
Our dynamic Team are always contributing the latest tips and techniques to keep you in the know with all things tax, accounting, and bookkeeping. See more from this author below.
