I had an interesting meeting with my accountant recently. It was a bit of a wake-up call. And if you operate an AirBnB rental, or are thinking about it, you might have a wake-up call in store for you too. Let me explain.
Most AirBnB rentals are residential properties that attract vacationers or visitors for short stays under a week or so. Hosts tend to think this is a great way to earn a few extra dollars. But, if you’re a host, it’s important to make sure you’re following all the relevant laws – and the laws are getting increasingly complex.
For starters, if you’re earning over $30,000 a year from your rental business, you should be collecting HST on your rentals. Otherwise, you run the risk of the government coming for their 13% and taking it out of your earnings. This isn’t new but it is a common oversight among new hosts.
Secondly (and this is a biggie) you run the risk of losing residential designation on your property if you have guests renting less than 30 days at a time (which is most AirBnB rental arrangements). This could shift your property into a commercial designation, which opens up even more tax implications. It would mean you would pay HST on the entire sale amount of the property when you go to sell it. This means you could lose money when you go to sell!
And for those not already aware, the City of Kingston is looking to bring in even tighter regulations on short-term rentals. These regulations have some good motivations that will also cause some reductions in income. For instance, the City is considering capping the number of days a short-term rental property can be rented in a year to 180.
Are you thinking about getting into the AirBnB market? I have several years of experience operating short-term and executive rentals in Kingston, and I want to share with you how my strategy is changing in light of the rapidly changing climate.
I am thinking of organizing a seminar on short-term rentals as an investment strategy – if you’d be interested in this, email me at firstname.lastname@example.org.
Note: The above article is not intended as financial advice, and you should consult a financial professional with specific questions.