Manitoba is a province defined by its lakes, expansive prairies, and dense forests. This central province attracts nature enthusiasts and tourists seeking the lively streets of Winnipeg, its capital.
Our guide clarifies whether you’re operating a rental business or earning passive income and explains how to maximize your rental property’s tax benefits.
What’s considered a short-term rental in Manitoba?
In Manitoba, a short-term rental typically refers to renting out a residential unit or part of a primary residence for fewer than 30 consecutive nights. Each region’s regulations may vary. For example, all short-term rentals in Winnipeg are limited to 29 consecutive nights. Furthermore, accommodation taxes and rules may differ across cities. For example, Winnipeg’s vacation property owners must obtain a permit. Additional restrictions apply to anyone owning a short-term rental property after February 23, 2023.
When should I report the rental income for my short-term rental?
Stay informed with the Canada Revenue Agency (CRA) tax filing deadlines:
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.
Do I always need to report my rental income?
Income generated from your residential property or any type of rental property is subject to taxation by the CRA. You do not have to report your income, nor should you claim deductions if you are renting below the fair market rate.
If you are cost-sharing with a relative, or your rental expenses are always more than your rental income, you don’t have to report your income.
How do I report rental income for my short-term rentals?
Canada’s federal government suggests that vacation rental property owners use a T766 Form to claim expenses related to their rental. Read this complete guide for Manitoba’s income tax package and follow these steps to file your taxes effortlessly.
Step 1: Gather the proper forms
Getting all your operating expenses and financial statements sorted will make filing taxes a breeze. Start collecting all your receipts, dates, income, and expenses at the beginning of each year.
Step 2: Determine if you are earning a rental or business income
Distinguishing between active and passive income from rental properties is vital for maximizing deductions and accurately showing your annual earnings.
Vacation property owners who rent out their property and offer only the bare minimum, such as lodging with amenities like heating, electricity, parking, and laundry facilities, fall under the passive income category.
However, if they take additional steps by offering services like cleaning, security, or even meals, you are operating a full-fledged business. This approach can have significant implications for tax purposes.
Step 3: Reporting earnings from short-term rentals
You can also claim all your rental expenses when you report your earnings on your T776 Statement. The federal government in Canada, through the Canada Revenue Agency, decides how much gain and loss you have to include in your taxes each year. They set the inclusion rate annually, which is generally half for the year. If your property increases in value (appreciation), that’s a capital gain. And if it decreases in value (depreciation), that’s a capital loss.
While capital losses can be claimed as expenses, the inclusion rate decides how much of that loss is deductible. Here are detailed instructions on how to complete a T776 Form.
Key tax deductions for short-term rentals
When tackling your personal tax return for residential properties, it’s vital to grasp the difference between current expenses and capital expenditures.
Current expenses cover ongoing maintenance tasks like repairs to uphold your property’s condition, while capital expenditures involve investments aimed at enhancing the property’s value. Capital expenses contribute to your home’s appreciation, whereas current expenses sustain its upkeep.
While individual homeowners might not capitalize on landscaping and exterior expenses, managing a vacation property allows you to invest in features like an irrigation system, a new driveway, or professional landscapers, which can be claimed as capital expenditures.
FAQ: Rental property tax deductions in Manitoba
Certain fees, such as professional fees, are deductible in Manitoba. Professional fees can include office expenses––anything you use in your business to facilitate the rental process.
Other eligible deductible expenses may include:
- Principal residence property taxes
- Travel expenses
- Property management expenses
- Advertising expenses
- Capital losses on your primary residence
- Soft costs
Each provincial government has its own RST. Travelers who reserve a short-term rental on Airbnb in Manitoba will pay a 7% RST for stays lasting 30 nights or less.
At VRBO, if the property owner is registered with the CRA and has given VRBO their GST identification number, the platform will send the GST collected on rent and owner fees to the owner for remittance to the CRA. Meanwhile, VRBO will handle the GST collected on its service fee, directly remitting it to the CRA.
When the property owner isn’t registered with the CRA or hasn’t provided their GST ID, VRBO will collect and remit the GST on rental income taxes.
A vacation property owner can claim the following costs as deductible expenses with Airbnb:
- Capital loss (depreciation)
- Furniture
- Cleaning/maintenance fees
- Marketing and advertising expenses
- Home office deductions and other business expenses
- Mortgage interest, insurance premiums, and property taxes.
Our final thoughts
If you’re wondering whether you want to be actively involved in a long-term rental or have minimal involvement with vacation rentals, review our guide on how to determine what’s right for you.
A short-term rental income on your residential units or primary residence can be an ideal extra income. We advise all new-to-leasing STR owners to consult a professional on maximizing their rental expenses.
