Airbnb tax rules Canada 2025: What Canadian Hosts Must Know

Airbnb and Short-Term Rental Changes in 2025

If you’re an Airbnb host in Canada, new short-term rental tax rules in 2025 are reshaping how you report income and claim expenses. The Canada Revenue Agency (CRA) has introduced stricter compliance measures, and cities across the country are enforcing tougher bylaws. To avoid penalties and protect your rental profits, it’s critical to understand these updates.

CRA’s New Approach in 2025

Starting in 2024, but fully in effect in 2025, the CRA denies expense deductions for non-compliant short-term rentals. That means if your property doesn’t follow municipal or provincial rules, you could lose the ability to deduct key expenses such as:

• Mortgage interest and condo fees

• Utilities and insurance

• Property maintenance, repairs, and cleaning

• Property management and service provider fees

Example:

If you earn $25,000 in Airbnb income and have $10,000 in expenses, a compliant host pays tax on $15,000. A non-compliant host could be taxed on the full $25,000 — a costly mistake for any Canadian Airbnb host.

What Makes an Airbnb Non-Compliant?

Under the new Airbnb tax rules in Canada 2025, a property is considered non-compliant if it:

• Operates without a valid municipal or provincial short-term rental license

• Is in a zone where short-term rentals are restricted or prohibited

• Doesn’t meet municipal health, fire, or safety standards

• Violates “principal residence” rules in cities like Toronto

Failing to comply can lead to denied tax deductions, fines, CRA reassessments, and retroactive penalties.

GST/HST and Airbnb in Canada

Airbnb hosts in Canada must also consider GST/HST rules:

• If your short-term rental income exceeds $30,000 in four consecutive quarters, you must register for GST/HST.

• If your property is used primarily for short-term rentals, the CRA may classify it as a commercial property, which could trigger HST on the sale of the property.

This classification has already caught Canadian hosts off guard — turning profitable investments into unexpected tax liabilities.

How Airbnb Hosts Can Stay Compliant in 2025

To protect your profits and avoid CRA penalties, Airbnb hosts should:

1. Check local bylaws – Cities like Toronto and Vancouver have unique rules (e.g., Toronto requires principal residence status).

2. Register and license your property – Don’t operate without proper municipal approval.

3. Keep strong financial records – Track rental income, length of stays, and all expenses.

4. Monitor the $30,000 threshold – Register for GST/HST when required.

5. Consult a Canadian tax advisor – A professional can help you structure your rental business, minimize tax, and stay compliant.

Why This Matters for Airbnb Hosts in Canada

Short-term rentals remain a lucrative opportunity, but in 2025 the CRA and municipalities are tightening the rules. Failing to comply could mean higher taxes, loss of deductions, and even being forced to stop renting. By staying proactive with compliance, Airbnb hosts in Canada can continue to benefit from the platform while keeping tax surprises to a minimum.

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