# Will I pay taxes on my room rentals?



## don kroetch (Aug 25, 2010)

I own a house with a 3 bedroom suite downstairs. I only rent out rooms. Sometimes its for a month. Sometimes for 4 months. Depends on who stays. Who doesnt. I get 500 for each room. They pay for their own food.

I went down to city hall and asked to see if Im allowed to use it as a rental suite. I am. And I pay taxes to do that. As a suite.

BUT i only rent out rooms. And sometimes not always. They dont go upstairs. I dont want to break any laws but they couldnt find anything to actually pinpoint what I do. 

Does anyone else do this? Is there a name for it under the city?


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## MoneyGal (Apr 24, 2009)

Do you mean income taxes? The answer is yes, or at least you SHOULD declare the income. 

What you are doing is providing short term suite rentals.


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## stardancer (Apr 26, 2009)

If you rent out part of your dwelling with the purpose of making a profit, it is rental income, whether you rent 1 room or 3. 

(Renting out not for the purpose of making money would be renting to a relative at lower than market rates)

You would complete a rental income statement with your tax return, showing the income and expenses and net profit/loss. Do not take depreciation on your house to bring down your rental income, as this will mess up your principal residence exemption later on.


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## Berubeland (Sep 6, 2009)

Rooming house is my bet.


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## don kroetch (Aug 25, 2010)

Its not considered a rooming house because they would have to go upstairs. They dont actually seem to have as I said anything down at city hall that is for what i do. They dont have short term room rentals as an option. 

And unless they do I dont think Im doing anything wrong? Its like saying okay you can stay here but pay this much to help me out with my house expenses. 

I used to pay my grandmother to stay at her house for example. 

Now the question is if there was an actual area for this, how much does one pay on taxes for this? For example say I rent out two rooms a month and make 1,000 a month. It doesnt make sense to declare something if Im losing it all in the end anyway. I need the money to help pay for the expenses of my house.


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## MoneyGal (Apr 24, 2009)

What has city hall got to do with anything? You aren't confusing property taxes with income taxes, are you? 

StarDancer's advice is good. Whether you "need" the money or not, you are obligated to declare it (unless you are really just cost-sharing; almost certainly not true in your case based on what you've told us). 

As for how much you will pay: you can use tax software to estimate the tax payable on this income. You will need to deduct legitimate expenses from the gross amount you take in. The total amount you would owe will depend on all your other income, credits, and deductions.


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## Cal (Jun 17, 2009)

If I understand you correctly...

You would claim all income on your income taxes, and be taxed accordingly.

The (based on square footage) your home, that is used for the business purpose/tenants (or whatever you want to call them) is the % of your business expenses that you could claim.


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## don kroetch (Aug 25, 2010)

Its not a business. Most definately not.

And I DO pay xtra taxes a year to be able to rent the downstairs as a SUITE. I was told I can rent it out because I pay extra every year to be able to do that. I believe they are property taxes because I went to city hall to find out. 

So legally I can rent it. 

But Im renting out rooms. And THAT they dont have a clause for. PLUS Im downstairs all the time. Im up and down so i use that part of the house. I also hang out with the people downstairs because I know a lot of them that come and go.

Maybe its one of those if it doesnt itch dont scratch it situation.


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## Addy (Mar 12, 2010)

don kroetch said:


> Its not a business. Most definately not.
> 
> And I DO pay xtra taxes a year to be able to rent the downstairs as a SUITE. I was told I can rent it out because I pay extra every year to be able to do that. I believe they are property taxes because I went to city hall to find out.
> 
> ...


It sounds like you're not sure what you pay for property taxes (in the sense you're not sure what you're paying for). If you check your property tax statement it should bring this to light - if you're not sure you can always ask at City Hall or even scan (I would advise blocking out all personal information) and asking people here for input.


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## MoneyGal (Apr 24, 2009)

This is a really confusing thread. 

If you have income, unless it is explicitly tax-free income (i.e., Canada Child Tax Benefit), it is taxable income which must be reported on your tax return. Otherwise, you are committing tax fraud and you should probably stop posting any details (like your NAME!) in places like this. 

The question of "whether it is a business" or not is a poorly-specified question. 

As StarDancer already pointed out, you need to report your gross income from rentals on your tax return using a Statement of Rental Income. 

You can *reduce* your gross rental income by deducting legitimate expenses, as I noted earlier. 

These are not "business" expenses, _per se_, but expenses that you incur in the course of carrying out your rental activity. You don't need a business number or business name or business account or anything else with the word "business" in it, and don't let that distract you from the reality that you must report the income. 

IF you do not make any money from this activity, you will have nothing to worry about, as you will not have any taxable income. However, if you have net income after your legitimate expenses are deducted, that income is, in fact, taxable - unless your total income falls below the taxable threshold for your province.


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## Cal (Jun 17, 2009)

Agreed with MG...if you take $, then it is a business.

If you have strangers staying at your home, for short periods of time...then this is a weird thread.

If you do take $...ie earn income...then it is a business.

You pay extra taxes (or whatever), you claim the income, then you claim the expenses as stated, as per what % of the home the tenants use, up to a max of 50% if you live in the home too. 

If you don't claim any earned income, you cannot claim expenses, as you are not running a business with a reasonable expectation to turn a profit.


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## kcowan (Jul 1, 2010)

You might want to check to ensure that you are not classed as a hotel. In Vancouver, four tenants constitutes a hotel and requires remission of HST and hotel tax.


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## humble_pie (Jun 7, 2009)

a grow-op ?


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## Young&Ambitious (Aug 11, 2010)

It is RENTAL INCOME, not business income. 

See CRA site for further details & clarification: http://www.cra-arc.gc.ca/E/pub/tg/t4036/t4036-e.html

The form you need to be filling out at tax time is T776 Schedule of Rental Income. Here you will be declaring your gross income less any expenses which can be attributed to the rented portion of your house. For example, if the rented area is 25% of your home's total square footage then you can only deduct 25% of your property tax on the T776 form against the rental income. Note, your property tax because you have a legal suite will be higher regardless of whether or not it is rented out, or atleast this is how it is calculated in my area, but check to see how yours is calculated. Someone else mentioned this as well but do not deduct CCA (CRA's version of amortization expense) against your rental income. 

The net rental income will be taxed at your individual rate of tax (eg. if your marginal rate of tax is 45% then your net rental income will be taxed at 45%). Remember, your personal income is taxed at the gross level whereas the rental income at the net level so I would imagine that your overall taxable income would not be substationally increased.

*edit* also, check out this CRA bulletin http://www.cra-arc.gc.ca/E/pub/tp/it434r/it434r-e.html which reinforces that what you are doing is rental not business.


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## MoneyGal (Apr 24, 2009)

Thanks, Y&A; the persistent use of the word "business" in this thread is confusing and, as you have pointed out, inaccurate.


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