# Renting to a family member



## OptsyEagle

I have a friend of mine who asked me a rental income tax question and I didn't have the exact answer. This person is renting a condo (in Ontario) to a brother who pays close to market rents and pays condo fees and other utilities.

My friend was told that because they rented to a family member they did not have to declare the income on their tax return. I told them I highly doubted CRA would give them that concession, but I have heard about rental income being waived in some circumstances. I can't remember if it is when you rent out your basement of your personal house at a low rental rate or maybe it is just the capital gain exemption (personal residence) they protected in the personal residence case.

Anyway, if anyone has some knowledge on this I would appreciate. My guess is that the money is taxable but are there circumstances where it is not?


----------



## fraser

It most definitely is taxable. Money changes hands.

Just because it is a non arms length transaction does not make it non taxable.

And the biggest mistake they are both making is telling other people about the arrangement. People do call in tips like this to the CRA and they are followed up. 

Loose lips sink ships.


----------



## Taraz

I think there was an exemption if your family member lives with you and pays well below market rent. That's more for cases where grandma lives in the basement and chips in for the utilities, though, not for cases where you might actually be making a profit. At any rate, if there's not much income after all the expenses (depreciation, taxes, insurance, maintenance etc.), they wouldn't have to pay much tax anyways.


----------



## wendi1

From the CRA website:

You can deduct your expenses only if you incur them to earn income. In certain cases, you may ask your son or daughter, or another relative living with you, to pay a small amount for the upkeep of your house or to cover the cost of groceries. You do not report this amount in your income, and you cannot claim rental expenses. This is, in fact, a cost-sharing arrangement, so you cannot claim a rental loss.

If you lose money because you rent a property to a person you know for less money than you would a person you don't know, you cannot claim a rental loss. When your rental expenses are consistently more than your rental income, you may not be allowed to claim a rental loss because your rental operation is not considered to be a source of income. However, you can claim a rental loss if you are renting the property to a relative for the same rate as you would charge other tenants and you reasonably expect to make a profit.


----------



## piano mom

Isn't it awkward to rent to a family member? Our previous tenant moved out and I wasn't going to offer the suite to my brother (who rents). He is already the jealous type. I can only imagine him feeling sorry for himself living downstairs in the suite and that would definitely hurt our relationship. No? I love my family but I would not like to live close to them.


----------



## OptsyEagle

Thanks. That was pretty much what I was thinking. I think it was wend1's situation that I had heard of but could not recite verbatim and was leaving me wondering.


----------

