If you are not sure whether your house is a long-term rental, a short-term rental or an airbnb, and you are worried about whether you will file an incorrect tax return, then the content of this video will definitely be helpful to you.
In order to better let you understand the differences in tax treatment between long-term rental, short-term rental, airbnb and homestay, I would like to briefly explain a few concepts first, and then I will use Ms. Ye’s rental business as an example to explain to you Do specific analysis.
First of all, in terms of length of time, a lease exceeding 30 days is called a long lease; a lease less than 30 days is called a short lease.
Secondly, in terms of income category, if you simply rent out the house and do not provide tenants with more than three optional services, such as breakfast, pick-up and drop-off, cleaning, laundry, etc., then it basically belongs to For rental income, when filling out the tax form, you fill out the T776 form; otherwise, it is equivalent to running a business, the income will be counted as business income, and you fill out a different tax form, the T2125 form.
The third issue is whether there is HST. Only hotel-style accommodations and homestays such as airbnb can have HST. As long as your annual income exceeds 30,000, you must register and collect HST; but like ordinary renting, Once the lease is signed, it is a one-year long-term lease without providing any other services, which means there is no HST. Regardless of whether your income exceeds 30,000 or less, it has nothing to do with HST. In addition, homestay is self-employed, and all income from homestay is counted as self-employment income. There is no such thing as both self-employment and rental income. Don’t forget this.
These three points are just basic concepts. You may still be a little confused. Now I will use Ms. Ye’s rental story to see how she should file her tax return at the end of the year.
Ms. Ye has a three-bedroom house in Niagara Falls. When she first bought it, she valued the beautiful scenery and it being a tourist attraction, so she didn’t have to worry about renting it. From January to April 2019, Ms. Ye’s house served as a homestay for two domestic students who came to Canada to participate in an exchange program. In addition to providing accommodation, Ms. Ye also included catering, transportation, cleaning, and some daily sightseeing and entertainment activities.
Because the exchange program between these two students ended at the end of April, Ms. Ye thought that the house could not be left empty after that, so at the end of April, she listed the house on the airbnb platform and planned to start it in May. Make airbnb short-term rentals. Due to the good location of the house and the good interior decoration, plus the large number of tourists who come to the Great Falls for vacation in the summer, the orders came flooding in and it was quickly booked from May to August. Ms. Ye also plans to go on vacation elsewhere during this period, but she still provides guests with services such as pick-up and drop-off, cleaning, and breakfast. What makes Ms. Ye very happy is that due to the good income from homestay and airbnb, the income of Ms. Ye's house exceeded 30,000 by July. So do you think Ms. Ye needs to register for HST at this time?
I mentioned to you at the beginning that homestay and airbnb both belong to the business category with HST, so no matter whether the annual income reaches 30,000 or not, even if there is no income yet, as long as you plan to do homestay or airbnb, then you can Register for HST tax number. If the annual income reaches 30,000, you must register for HST. This is the difference between possible and necessary. So when should you register? If you think you can make money by doing this business, of course, the sooner you register, the better. Because with a tax number, you can apply for the HST part of some of the investment expenses you made in the early stage, such as decoration, buying some necessities, etc. There is a tax refund; and if you start to make money, when the HST in the expenses is greater than the HST collected from the tenant, then there will also be a tax refund. Of course, it depends on whether you also live in it. If so, the fees and HST portion need to be calculated based on the actual proportion of owner-occupied and rented out.
Let’s continue. Beginning in September, Ms. Ye accepted a long-term lease offer. The lease is for one year, starting on September 1st. This long-term rental is a rental in the ordinary sense. Ms. Ye does not live in it and only charges rent every month. So this income is easy to understand, it is rental income and has nothing to do with HST.
Over the past year, Ms. Ye’s three-bedroom apartment has been rented out in three forms: one is a long-term homestay, the other is a short-term airbnb, and the third is an ordinary long-term rental. So how does she file her taxes at the end of the year?
First of all, homestays and airbnb can declare HST. As for when to calculate it, it depends on when Ms. Ye registered the HST tax number. If she registered the HST tax number on January 1, then the calculation of HST The time is from January to August; if she registered for HST on July 1st and her income reached 30,000, then the accounting time is from July to August.
The next step is how to fill in the income and expenditure tax form correctly. Because homestay and airbnb are generally considered self-employed, and their income is business income, Ms. Ye should fill in the T2125 form for homestay income from January to April and airbnb short-term rental from May to August, and the remaining 9-12 It is an ordinary long-term lease, and there is no doubt that the T776 form is filled out. As for expenses, they follow different incomes and are filled in different tax forms accordingly. It should be noted that if Ms. Ye also lives there, she needs to be calculated on a proportional basis, which is the same as calculating HST.
