Airbnb Hosts Should Not Worry About the Upcoming 2024 Tax Law Amendments

In recent developments, the Canadian federal government is causing ripples in the short-term rental community – and in particular for hosts on platforms like Airbnb, Booking.com, and Vrbo. Prime Minister Justin Trudeau’s government is introducing new tax measures that will come into effect January 1st, 2024 which will tighten the reins on the short-term rental market. Let’s take a closer look at these federal regulations and explore how they may affect Canadian Airbnb hosts renting out their homes as short-term rentals.

What are the new regulations?

The federal government's clampdown on short-term rental hosts is rooted in concerns related to tax evasion and the relieving the stress of housing shortages. As reported by The Star and Reuters, the key element of these regulations is to implement a new tax measure that will prevent hosts from claiming expenses “against the income they make from their rentals.” In other words, hosts will not be able to deduct expenses like furniture purchases, utilities expenses, etc, from their taxes if they host guests on platforms like Airbnb. Simultaneously, the government announced that it will be spending $50 million over the next three years to support municipal enforcement of restrictions.

Who will be affected by the new regulations?

It is not perfectly clear how these tax measures will affect current and future short-term rental hosts on popular platforms like Airbnb. Similar statements to the following one made by The Toronto Star are in all articles published in the last couple of days: "It [tax measures] will only apply to property owners in areas that prohibit short-term rentals or who are non-compliant with local laws." Such statements would seem to imply that only those not in compliance with local laws would be unable to deduct Airbnb-related expenses from their taxes. If that is the case, many Airbnb hosts, especially Toronto and Montreal hosts, can enter the new year 2024 with no worries whatsoever.

Why Shouldn’t You Be Worried?

Given the wording of government statements, hosts complying with city laws are likely to not be affected by the recent federal announcement. The statements clearly say that come January 1st, 2024 tax changes will only impact those who are conducting Airbnb illegally. Hosts short-term renting with valid permits issued by their municipal government fulfill the requirements for a legal Airbnb. In Toronto or Montreal, where obtaining a valid permit is a prerequisite for publishing an Airbnb listing, the impact of these federal regulations might be insignificant. 

Positives to Consider:

Although many Airbnb hosts are concerned about the upcoming federal clampdown in Canada, StayPro Property Management sees a silver lining in these regulatory changes. These regulations imposed on the short-term rental market will weed out illegal operators, while leaving compliant hosts be. As a result, StayPro anticipates a significant reduction in the number of illegal Airbnbs saturating the market. This reduction in competition, especially in suburbs of cities like Toronto and Montreal, will provide a promising opportunity for compliant hosts to get higher earnings and occupancy rates.