The income from your vacation rental can either be charged as rental income or business income depending on the service rendered. Usually, you will be considered to have earned rental income when you rent space and provide essential services such as heat, light, parking, and laundry facilities and you will be required to report your income on form T776 (Statement of Real Estate Rentals) and declared on line 12600 of your personal income tax return as passive income but if you fall in this category yet have more than one property as Airbnb, your income is considered as a business income alongside operators who provide additional services such as meals, security, and cleaning. Your income should be declared on line 13500 of form T2125 to the Canada Revenue Agency (CRA) irrespective of the city where you are located.

Rental income is subject to GST/HST. While STR operators whose income is classified as business income and rental income that exceeds $30,000 in four consecutive quarters are required to register for GST/HST, charge their guests for the tax, and remit the tax to the CRA.

Deductible tax expenses that are directly related to the home-sharing such as; cleaning costs, maintenance costs, advertising costs, interest on a mortgage, (although the principal payments cannot be deducted), insurance costs, souvenirs for guests (such as books, snacks, bottles of wine), property tax, gas bills, electricity bills, water bills, STR permit fees, referral fees, etc. are allowed as long as you keep a detailed record that supports the expenses incurred to earn rental income. GST/HST registrants are also allowed to claim GST/HST on expenses (e.g., advertising, referral fees, etc.) and pay GST/HST on a net basis.

NOTE:

Capital Expenses such as the cost of buying a washing machine or refrigerator etc. are spread over the life of that asset and are based on capital cost allowance rates prescribed by the CRA.