British Columbia offers a mix of urban appeal, nature, and wildlife that will leave a mark on every type of tourist. If you operate one or several vacation rental properties in BC, learning how to capitalize on tax deductions is essential.
What’s considered a short-term rental?
In the stunning landscapes of British Columbia, short-term rentals (STR) offer bespoke lodging experiences. For stays of fewer than 90 consecutive days, guests indulge in the charm of residential properties or certain secondary units.
Typically situated in residential or resort locales, these rental properties mainly cater to tourists seeking temporary accommodation.
New legislation in British Columbia, starting May 1, 2024, will restrict STRs to primary residences or accessory dwellings––any separate main, single-family home, duplex, or other residential unit.
When should I report the rental income for my short-term rental?
Rental property owners should report all earnings on their income tax return by April 30, 2024. Self-employed taxes in Canada are due June 15, 2024.
Here are the deadlines for filing taxes:
February 29, 2024
Retirement Savings Plan (RRSP)
Pool Registered Pensions (PRPP)
April 30, 2024
Deadline to file your taxes for the 2023 tax year.
June 15, 2024
Deadline for married or common-law partners who are self-employed.
When you have a RRSP, those funds will not be taxed.
Do I always need to report my rental income?
All STR owners must report their rental income. Federal government taxes are collected by the Canada Revenue Agency (CRA).
You must report your earnings if you decide to use online platforms like Airbnb and VRBO. Airbnb shares your income with the CRA.
How do I report rental income for my short-term rentals?
The Canadian federal government recommends using a T776 Form to report rental income on a short-term rental property to the CRA.
There are two primary taxes for hotels and online marketplaces, such as Airbnb and VRBO. One is called the PST, and the other is the MRDT. The MRDT is 3% in British Columbia. There is also a special tax for the city of Vancouver, BC, called the Additional Major Events MRDT. This tax is temporary and helps the city when hosting big events.
You may need to register, depending on the provincial government’s rules, to report these taxes properly. For example, in Vancouver, all STR property owners must be registered.
To report your taxes efficiently and maximize your rental property deductible expenses, follow these steps.
Step 1: Gather the proper forms
Keeping a detailed record of all your rental activity, including rental periods, taxes collected, cleaning, maintenance, and service, will help you report your taxes.
Step 2: Determine if you are earning a rental or business income
Many homeowners renting out temporary lodging are typically not classified as self-employed by official government standards. A self-employed host for an STR is an individual who owns or manages property and actively participates in the short-term rental process, from advertising to cleaning and maintenance to offering other special services. If you are filing as self-employed, set aside 20% to 30% of your rental income. You can expect to pay a Federal and Provincial Sales tax (PST). The general PST in BC is 7%.
Step 3: Reporting earnings from short-term rentals
Though you must report your earnings on your personal tax return, you may be eligible for tax deductions. A T776 Statement will help you determine valid rental expenses and guide you on how much you can save. Here are detailed instructions on how to complete a T776 Form.
Key tax deductions for short-term rentals
Some capital expenses can be deducted, such as updates to the home that will add value to the property. Other key deductions on rental expenses that you may qualify for include:
- Advertising
- Property Insurance
- Interest and bank charges
- Office expenses
- Professional fees
- Management fees
- Maintenance and repairs
- Property taxes
- Travel expenses
- Utilities
- Motor vehicle expenses
- Property management fees
- Applicable soft costs
Speaking with a real estate professional will help you understand your tax liability and which deductions you can maximize.
FAQ: Rental property tax deductions in British Columbia
If you are self-employed, you can deduct certain business expenses used to operate your rental. You may also be able to deduct property taxes from your primary residence and certain current and capital expenses.
Each provincial government has its own rules. Beginning May 1, 2024, British Columbia will limit STRs to primary residences or residential units.
Painting, pressure washing, or other maintenance costs count as current expenses and can be deducted as such.
Our final thoughts
If you’re a property owner who is deliberating whether to rent your home as a long-term or short-term rental, learn the pros and cons of each and find out what’s right for you. Property owners interested in renting for the long haul will find our collection of rental documents helpful in staying organized throughout the process.
