Airbnb and Short-Term Rental Tax Rules

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Introduction
Understanding Airbnb and short-term rental tax rules is essential for property owners, investors, condo landlords, and homeowners across Canada and especially in Québec. Short-term rentals—Airbnb, Vrbo, Booking.com, furnished rentals under 30 days—are treated very differently from long-term rentals. CRA and Revenu Québec classify most short-term rental activity as a commercial business, not passive rental income. This leads to major tax consequences involving GST/HST, QST, expense deductions, CCA, principal residence rules, and high audit risk. This guide explains everything you must know about Airbnb and short-term rental tax rules to stay compliant and avoid penalties.

Legal and Regulatory Framework
Airbnb and short-term rental tax rules are governed by:

• the Income Tax Act
• the Excise Tax Act (GST/HST)
• Québec’s Taxation Act (QST)
• municipal bylaws (varies by city)
• CRA Form T776
• Québec Form TP-80
• CRA/ARQ rules for commercial activity
• CRA guidance for platform economy income
• GST/HST and QST audit policies

Short-term rentals involve two main areas of compliance:

1. Income tax reporting

2. Sales tax reporting (GST/HST & QST)

Failure in either area leads to reassessments.

1. Income Tax Rules for Airbnb and Short-Term Rentals

A. Rental Income Must Be Reported in Full

You must report:

• nightly rental income
• cleaning fees
• pet fees
• parking income
• service fees paid by guests
• Airbnb payouts (before their service fees)
• any cash payments
• long-term rental add-ons

CRA receives Airbnb data directly from third-party platforms. Non-reporting is very high-risk.

B. Airbnb Is Often a Business, Not Rental Income

Short-term rentals under 30 days often involve:

• cleaning
• stocking supplies
• marketing
• turnovers
• guest services

CRA classifies this as business income, not simple rental income.

This means:

• GST/HST applies
• QST applies automatically in Québec
• net income is taxable as business income
• more deductions may apply
• losses must meet REOP (reasonable expectation of profit) tests

Understanding Airbnb and short-term rental tax rules is critical before listing your property.

C. Expense Deductions Allowed

You may deduct:

• mortgage interest
• property taxes
• condo fees
• insurance
• cleaning fees
• supplies (toiletries, linens, furniture)
• utilities
• repairs and maintenance
• Airbnb commissions and platform fees
• advertising
• internet

Capital expenses (furniture, renovations, appliances) must be depreciated using CCA.

D. Mixed-Use Properties Must Be Allocated

If you rent part of your home:

• allocate expenses between personal and rental use
• document square footage and usage

CRA scrutinizes mixed-use properties heavily.

2. GST/HST Rules for Short-Term Rentals

This is where most Airbnb hosts make mistakes.

A. GST/HST Applies to Rentals Under 30 Days

Short-term rentals are taxable supplies under the Excise Tax Act.

You must charge GST/HST if:

• you earn over $30,000 in worldwide taxable revenues (including other businesses) in 4 consecutive quarters, or
• you expect to exceed $30,000 in a single quarter, or
• your Airbnb is considered a taxable commercial activity

If you pass the threshold:

• you must register
• you must charge GST/HST
• you must remit GST/HST
• you can claim ITCs on expenses

Failure to charge GST/HST creates massive reassessment exposure.

B. Provincial Breakdown

• Ontario → HST 13%
• Nova Scotia → HST 15%
• Alberta → GST 5%
• BC → GST 5% (plus municipal PST/hotel taxes in some cities)
• Manitoba/Saskatchewan → GST 5%
• Newfoundland → HST 15%

GST/HST depends on the location of the property, not where you live.

C. Airbnb Does NOT Always Collect GST/HST for You

Platforms may:

• add GST/HST to the guest invoice (varies by province)
BUT
• YOU are still responsible for GST/HST registration and remittance

Airbnb’s “remitted on your behalf” wording does not remove legal responsibility.

3. QST Rules for Short-Term Rentals (Québec Only)

This is where Airbnb hosts in Québec face the greatest risk.

A. QST Applies to All Short-Term Rentals

Airbnb and short-term rental tax rules in Québec require:

• QST to be charged regardless of the $30,000 threshold
• mandatory registration under General QST system (NOT the simplified system)
• filing monthly, quarterly or annual QST returns
• remitting all QST collected

Even a single Airbnb booking can trigger registration.

B. Québec Requires:

• GST registration (if over $30,000)
• QST registration (always for short-term rentals)
• Hotel establishment number (CITQ certification)
• Municipal compliance (zoning, permits)

ARQ aggressively audits Airbnb hosts for missing QST.

C. ITCs & ITRs

Once registered:

• GST input tax credits (ITCs)
• QST input tax refunds (ITRs)

are available on cleaning, furniture, supplies, maintenance, and renovations.

4. Losses, CCA & Principal Residence Risks

A. Claiming CCA on Airbnb Can Cost You the Principal Residence Exemption

If you claim CCA on your home’s Airbnb portion:

• you may lose principal residence exemption on that portion
• future capital gains may be taxable

Airbnb owners must plan carefully.

B. Business-Use-of-Home Issues

If you rent a room or portion of your home:

• REOP tests apply
• personal vs rental allocation required
• Airbnb cleaning hours prove business operation

CRA scrutinizes these claims heavily.

5. Recordkeeping Requirements for Airbnb

Airbnb hosts must keep:

• invoices for cleaning
• receipts for supplies
• mortgage statements
• condo board rules
• Airbnb payout statements
• occupancy logs
• municipal permit documentation
• GST/HST and QST invoices
• renovation receipts
• legal fees
• advertising invoices
• service contracts

Keep records for six years, or longer for capital property.

Key Court Decisions

Courts have ruled:

• Airbnb = business activity, not passive rental
• GST/HST applies to most short-term rentals
• CCA can trigger capital gains on sale of home
• undocumented expenses are denied
• short-term rentals require proper invoicing
• Québec hosts must comply with QST rules even if Airbnb collects GST

These cases confirm Airbnb and short-term rental tax rules are strictly enforced.

Why CRA and Revenu Québec Target Airbnb

Audit triggers include:

• unreported Airbnb income
• large cleaning or supply expenses
• mixed personal/rental use
• missing CITQ permit in Québec
• failure to register for QST
• claiming CCA improperly
• mismatched Airbnb payouts vs bank deposits
• excessive losses without REOP

Both agencies receive Airbnb data from platform reporting.

Mackisen Strategy

Mackisen CPA provides complete Airbnb and short-term rental tax support:

• preparing T776 and TP-80
• calculating Airbnb-specific expense deductions
• determining if GST/HST registration is required
• registering GST/HST and QST
• filing QST returns
• obtaining ITCs and ITRs
• organizing audit-proof Airbnb documentation
• analyzing principal residence risks
• optimizing mixed-use allocations
• defending hosts in CRA and ARQ rental audits

We protect hosts from costly reassessments.

Real Client Experience

Examples of Airbnb clients Mackisen helped:

• A Montréal condo owner failed to register for QST. ARQ issued a large reassessment. We corrected filings and negotiated a payment plan.
• An investor operating 3 Airbnb units failed to charge GST/HST. CRA reassessed for two years. Mackisen filed retroactive returns and minimized penalties.
• A cottage owner claimed CCA unknowingly and triggered capital gains on sale. We restructured filings and appealed to reduce tax.
• A downtown landlord lost receipts for cleaning and supplies. We reconstructed evidence and saved most deductions.
• A host using Airbnb part-time misallocated personal vs rental expenses. Mackisen recalculated allocations properly.

Common Questions

• Do I need to report Airbnb income?
Yes—100%. CRA receives platform data.

• Do I need to charge GST/HST?
Yes—if you exceed $30,000 or operate commercially.

• Do I need to charge QST in Québec?
Yes—short-term rentals always require QST registration.

• Can Airbnb collect GST/QST for me?
Not fully—registration remains your responsibility.

• Can I claim the principal residence exemption?
Yes, but CCA claims on Airbnb portions may impact it.

• Are Airbnb losses deductible?
Yes—if REOP is demonstrated.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps Airbnb hosts and short-term rental operators comply with tax laws while maximizing legitimate deductions. Whether you're reporting Airbnb and short-term rental tax rules, registering for GST/HST and QST, or navigating a CRA/ARQ audit, our expert team ensures full accuracy, compliance and protection from penalties.