Thinking about renting out your basement or a secondary suite in Ontario? Here’s what you need to know about tax implications before you hand over the keys! 🔑
✅ Report Rental Income: All rental income must be reported to the CRA and taxed at your marginal rate. Keep records of payments and lease agreements!
✅ Claim Deductible Expenses: You can deduct a portion of mortgage interest, property taxes, insurance, utilities, repairs, and advertising costs—proportionate to the rental unit’s share of the home.
🚨 Capital Gains & Principal Residence Exemption (PRE): Renting out part of your home could affect your ability to claim the PRE when selling. However, if your rental space is small, has no major structural changes, and you don’t claim depreciation (CCA), you may still qualify for full exemption!
🏠 Property Taxes & Ontario Incentives: Some Ontario cities offer property tax breaks for newly built rental suites. However, adding a legal secondary suite might increase your property’s assessed value and municipal taxes. Check with your local municipality for programs that reduce costs!
💵 GST/HST Considerations:
🔹 Long-term rentals? No HST required!
🔹 Short-term rentals (Airbnb-style)? If you earn $30K+ annually, you must charge HST on rent and register for a GST/HST number.
🔹 Building a brand-new unit? Special HST rules may apply, including possible rebates!
🚀 New Tax Incentives & Programs: ✅ Federal Tax Credit – Up to $7,500 for adding a unit for a senior or disabled family member.
✅ Interest-Free Loans – Up to $80,000 (coming in 2025) for building a new secondary suite!
✅ Ontario’s Bill 23 – Waives development fees on secondary units to encourage rental housing.
💡 Pro Tip: Tax rules for rental units can be complex—plan ahead to maximize deductions and avoid surprises!
Need personalized advice? We can help! 📊💼 Contact us today!
📩 DM us or call Freeman & Lourenco LLP at 905-576-4619 for expert tax guidance on your rental property! 📞📊
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