The potential to earn passive income on Airbnb has proven real for countless entrepreneurs in Canada and around the world. Data from various sources suggests hosts earn more than $40,000 off a single property, on average. If you find yourself among them, congratulations! Just one thing - the government wants its share. Airbnb income taxes can get complicated quickly, and that's even truer as policies change from year to year and country to country. Today, we'll walk you through the basics of reporting in Canada.
Income Tax Obligations In Canada
Pretty much every Canadian has to pay income tax. For most people, that means 14.5% to 33% of a traditional paycheck. But in today's side-gig, hustler economy, some earn money from other sources - like Airbnb. Short-term rental owners effectively run their own businesses and are expected to follow tax laws accordingly.
All income you earn from Airbnb must be reported as rental income on your annual tax return. You'll use the T1 General form along with Form T776 Statement of Real Estate Rentals to declare this income to the Canada Revenue Agency (CRA). This requirement applies regardless of how you're renting - whether it's an entire investment property, a spare bedroom in your primary residence, or a basement suite.
If your Airbnb earnings exceed $30,000 annually from short-term rentals (defined as stays under one month), you're required to collect taxes from guests. This threshold applies to total revenue, not profit. Qualifying hosts must charge GST/HST on top of their nightly rate and remit it to the CRA regularly.
Doesn't Airbnb Charge Taxes for Me?
It can, yes. Airbnb can collect and remit the GST/HST and/or QST on listing rates, cleaning fees, and other applicable charges when provided with an account number. That's something you have to register for online.
How to Report Airbnb Income
Airbnb income in Canada is reported as rental income on your personal T1 Income Tax and Benefit Return. You also need to complete Form T776, Statement of Real Estate Rentals, for each rental property or grouping of similar properties to calculate your net rental income or loss.
On Form T776, enter your total gross rents in the income section and list all your rental expenses in the expenses section to determine net rental income. The resulting net rental income (or loss) flows to specific rental lines on your T1 (lines 12599 for gross and 12600 for net), which then feed into your overall taxable income.
If you co-own the property, the CRA expects you to show gross rental income for the entire property on Form T776 and then allocate the net amount to each co‑owner according to ownership percentage. When part of the property is personal use (for example, you live upstairs and rent the basement), you must show the full expense in the “Total expenses” column and the personal portion in the “Personal portion of total expenses” column so only the rental share is deducted.
Lowering Airbnb Taxes with Deductions
Even if you only host occasionally or earn a modest amount, the CRA expects you to report it. Note that applies regardless of whether you pass the $30,000 GST/HST qualification threshold. The good news? You're also entitled to deduct legitimate business expenses against that income. The same goes for GST and HST.
The CRA lets you deduct reasonable expenses incurred to earn rental income, which are reported in the expense section of Form T776. For Airbnb hosts, common deductible “current” expenses typically include:
- Mortgage interest on the rental portion of the property (but not principal).
- Property taxes for the rental share of the home or unit.
- Insurance premiums related to the rental property, including short‑term rental or landlord coverage.
- Utilities such as electricity, heat, water, gas, internet, and cable, where you pay them as part of the rental arrangement.
- Maintenance and repairs that keep the property in rentable condition, like fixing appliances, repainting, or replacing worn items.
- Cleaning, laundry, and turnover costs, including professional cleaners and cleaning supplies.
- Advertising, Airbnb/service/platform fees, and any additional marketing or property management fees.
If you improve or significantly renovate a space (for example, adding a bathroom, finishing a basement, or upgrading beyond original condition), “capital expenses” on the project can be claimed as well. Capital Cost Allowance (CCA) spreads savings over several years and can be requested using Form T776.
Do You Have a Permit for That?
In addition to tax obligations, it's important to remember the government also imposes red tape on Airbnb hosts in the form of permit requirements. These vary dramatically across Canada; on a national level everyone must comply with federal tax rules, but the day‑to‑day permission to actually operate a short‑term rental is controlled by provinces and, more importantly, municipalities.
In practice, that means your city or town may require you to register as a short‑term rental operator, obtain a business licence, prove the unit is your principal residence, and display a registration or licence number directly on your Airbnb listing.
Many larger centres also limit how many nights per year you can rent your entire home, restrict short‑term rentals to specific zones, and layer on nightly “hotel‑style” taxes such as Municipal Accommodation Tax (MAT) on top of GST/HST. Toronto is just one example of many major municipalities with such a policy on short-term rental operations.
Taxes are no fun. But unfortunately, they're a non-negotiable part of living in a structured society. As an Airbnb host, you've got extra responsibilities to remember when it comes to reporting income. Stay on top of it all - and avoid penalties - by taking that reality seriously and putting the steps in this article into practice.
