The CRA is making changes again, this time targeting short-term rentals. The regulatory environment is getting more and more stringent on these types of investments.
The new rules apply as of January 1, 2024, in provinces and municipalities that already regulate short-term rentals and affect deductions such as interest expenses. The tax change is meant to target owners who flout local regulations. The Feds are also introducing funding for municipalities to crack down on unlicensed STRs. Essentially, the Canadian government wants to make it less profitable to own a short-term rental in populated areas, with the intention of turning some of these into long-term rentals to provide supply.
The funny thing is that the media is not up to date on what is actually happening in the marketplace. Anecdotally speaking, units are getting harder to fill recently, and rents are starting to come down a little, as more rental supply comes on the market from people who are waiting for resale prices to kick up again.
If you own a short-term rental that falls under these new rules, check with your CPA to devise a strategy before you put the for sale sign up in front of the family cottage. There may be ways to minimize your tax obligations. While we are not a CPA firm, we have strategic partnerships with knowledgeable CPAs who can point you in the right direction. When in doubt, reach out!
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