The federal government has launched a consultation about changes to the Income Tax Act which would regulate short-term rentals. The goal is to make housing more affordable and ensure the fairness of Canada’s tax system.

If passed, the draft legislation will bring into force the 2023 Federal Fall Economic Statement proposal to deny income tax deductions for non-compliant short-term rentals by amending the Income Tax Act and adding a section after section 67.6.

A non-compliant short-term rental is defined as a residential property offered for rent for a period of less than 90 consecutive days, located in a province or municipality that:

• doesn't permit the operation of a short-term rental at the location of the short-term rental; or
• requires registration, a licence, or a permit to operate as a short-term rental, if the short-term rental doesn't comply with all registration, licensing, and permit requirements.

Short-term rental owners would be unable to deduct any amount for an outlay made, or an expense incurred, in respect of a short-term rental to the extent the outlay or expense is a non-compliant amount for the taxation year.

Read the federal Department of Finance news release about the government cracking down on short-term rentals.

Read the draft legislative proposals relating to the Income Tax Act and short-term rentals. The section is near the end. Search using the words “short-term”.

If you have suggestions, comments, or recommendations about this proposed consultation legislation, please contact Harriet Permut, director of government relations at hpermut@rebgv.org.