The impact of online daily home booking websites like AirBnB and VRBO on Vancouver’s tight residential rental market appears to be significant and has attracted some academic scrutiny as of late. Daily rentals are not typically permitted as a residential use under existing city Land Use Zoning; they typically contravene Strata Bylaws; and they dodge the normal protections renters enjoy under the Residential Tenancy Act.
Are services like Air BnB and VRBO also dodging significant taxes?
Recent reports from reputable news media like the CBC suggest that many Air BnB hosts may not be reporting income. Air BnB advertises that hosts can make significant sums annually renting out a suite or single rooms ($34,320/year on average for a Vancouver 1 bed suite). Various advisory sites caution hosts on the need to report income for tax purposes. They also note that hosts can deduct expenses pro-rated on the number of rooms or area that they rent out, but something here seems a bit out of order as well though: can a person who infrequently rents one of two rooms write off 40% of their annual rent or heat or strata fees as expenses merely because they post availability and rent out a room one or two nights a month? Hmmmm. It’s a slippery slope.
A GST Surprise?
Beyond any combination of self-employment income exceeding $30,000/yr, (from any combination of sources) those running Air BnB operations are liable to collect GST on their total self-employment income. And this today from the City of Vancouver – an appeal for the Province to collect Hotel Taxes for these online daily home rentals on par with those paid by legitimate hotels: http://www.cbc.ca/news/canada/british-columbia/airbnb-tax-vancouver-1.3655343
- Is Revenue Canada adequately monitoring these businesses? A recent story from CBC here: http://www.cbc.ca/news/business/taxes/airbnbers-and-uber-drivers-be-warned-your-income-is-taxable-1.2969158 suggests that Air BnB hosts ARE being monitored, but to what degree?
- Should homes rented out on Air BnB and VRBO be eligible for valuable Capital Gains Exemptions intended for owners who occupy their home as their primary residence? Again, it would be interesting to see if anyone is cross-checking.