As the sharing economy continues to grow an increasing number of startups are being developed that provide everyday people with the opportunity to increase their income streams. This is causing the average person’s tax return to become much more complicated than it would be with a simple T4 income.
First things first YES you need to claim your AirBNB income. It may be your “fun money” but to the government it’s income and it won’t be fun income if you don’t claim it and the government finds out.
How to Claim This Income
Airbnb income is considered rental income so long as you don’t include meals, personal laundry services, and other tourism services to your guests, in that case, it’s going to be business income.
If it’s confirmed rental income you need to complete a T776 (Statement of Real Estate Rentals) and declare the income on line 126 of their federal return.
How To Calculate Your Expenses
The benefit of claiming this income is that unlike T4 income you can claim your expenses to offset the total net income.
The Full Property Is rented
When calculating your expenses you need to make sure that you calculate the correct percentage. You can only claim operating costs for the time your property was generating revenue.
For example: If you rent out your entire place for 165 days of the year (45% of the year) and make a total of $11,000 and over the course of the year the claimable expenses you incur on the property (eg. property taxes, strata fees, insurance) are $15,000, you can only claim 45% of this amount (ie: 165 days worth of expenses) so – $6781. Making your net income $4219. Expenses that relate directly to the rental such as replacing sheets and cleaning fees that you incur over those 165 days are 100% deductible.
Renting Out A Room
If you only rent out a room in your house then things become a little more complex. You need to go a few steps further and separate out the expenses that directly relate to the room you are renting (linen, decorating etc.) and divide them by the percentage of use (as demonstrated above) in addition to calculating your rental operating expenses for the house dividing them by the percentage of the year the room was rented AND then again by the percentage of the house used to generate income.
For Example: If you rent out a room in your home (¼ of your house) for 200 days of the year and make $10,000, the claimable expenses for the entire home $12,000 annually and the expenses relating directly to the room were $1500 annually.
You can only claim the following – The operating costs throughout the time you made the income (200 days of costs) will be $6575 for the entire home. This then needs to be divided by 4 as only ¼ of the home was rented out so $1644 can be claimed.
In addition, you can claim $822 worth of expenses for the $1500 of furniture you purchased that was used for rental purposes 200 days.
What Expenses Can You Claim
The following is a list of expenses that are deductible:
Each can be explored in more detail by visiting the link.
- Advertising
- Insurance
- Interest
- Professional fees (includes legal and accounting fees)
- Repairs and maintenance
- Management and administration fees
- Motor vehicle expenses
- Office expenses
- Other expenses
- Prepaid expenses
- Property taxes
- Salaries, wages, and benefits (including employer’s contributions)
- Travel
- Utilities
If you are unsure of what you should and shouldn’t claim we recommend filing your return with a tax professional. What may feel like a saving by not paying for advice now could cost you later if you are audited and forced to pay penalties and interest on overdue funds.
