Rental income vs business income, HST on short-term rentals, CCA on your property, and every deduction available to Canadian hosts
Hosting on Airbnb in Canada is one of the most lucrative side hustles available — but it's also one of the most complex from a tax perspective. The CRA's treatment of short-term rental income involves questions about income classification, mandatory GST/HST registration, principal residence implications, Capital Cost Allowance, and municipal licensing. This guide covers every aspect you need to handle your Airbnb taxes correctly in 2026.
The CRA distinguishes between passive rental income (reported on T776 — Statement of Real Estate Rentals) and active business income (reported on T2125). For Airbnb specifically, the classification depends on the level of services you provide to guests:
The classification matters because business income attracts CPP contributions on net earnings; rental income does not. Business income allows more flexible deduction rules; rental income has its own specific rules. Most Airbnb hosts in Canada are in the rental income category.
This is where many Airbnb hosts are caught off-guard. Residential long-term rentals (monthly tenancies) are GST/HST exempt. But short-term rentals of less than 30 continuous days are taxable supplies under the Excise Tax Act. This means:
| Expense | Deductible % | Notes |
|---|---|---|
| Mortgage interest | Rental % | Interest only, not principal. Rental use % of total home. |
| Property tax | Rental % | Business use portion of annual property tax |
| Home insurance | Rental % | Standard home insurance + any short-term rental rider |
| Utilities (heat, hydro, water) | Rental % | Prorated by rental use percentage |
| Airbnb platform fees (3%) | 100% | Platform service fee is a business expense |
| Cleaning costs | 100% | Professional cleaner between guests — fully deductible |
| Cleaning supplies | 100% | Soaps, linens, paper products for guest use |
| Repairs and maintenance (rental portion) | Rental % | General home maintenance prorated; specific repairs to rental space 100% |
| Furnishings for guest space | CCA Class 8 (20%) | Furniture specifically for rental space |
| Photography (listing photos) | 100% | Professional photographer for your listing |
| Guest supplies (toiletries, coffee, etc.) | 100% | Amenities provided to guests |
| Property management fees | 100% | If you use a co-host or property manager |
| Accounting and legal fees | 100% | For the rental activity |
| Internet (rental use %) | Rental % | Provide internet to guests — deduct rental time % |
If you rent out only part of your home (a spare bedroom, basement suite), you must calculate the rental use percentage: rental area ÷ total home area. If you rent out your entire home seasonally (e.g., 120 days per year), the time-based percentage is also relevant: 120 ÷ 365 = 32.9% annual rental use.
For a property that is both partially rented (by space) and partially seasonal (by time), combine both percentages: 30% of home × 40% of the year = 12% overall deductibility for shared expenses.
CCA can be claimed on the building portion of a rental property (not the land) under CCA Class 1 at 4% declining balance. However, claiming CCA on your principal residence significantly complicates your principal residence exemption — and may trigger a capital gain when you sell. Most tax advisors recommend NOT claiming CCA on your principal residence even if it's partially rented. Discuss with your accountant before claiming.
If you rent out part of your principal residence on Airbnb, you may partially lose the principal residence exemption when you sell. The CRA's position is that renting part of your home can convert that portion to income-producing property, triggering a capital gain on the rental portion of any appreciation. The risk is mitigated if: the rental space is not a separate self-contained unit, you don't claim CCA, and the rental use is incidental to your personal use. Consult a CPA before starting if you plan to sell within a few years.
Beyond federal taxes, short-term rentals in Canada are increasingly regulated municipally and provincially. Toronto, Vancouver, Ottawa, Calgary, and most major cities require short-term rental permits/licenses. Some require the rental to be your principal residence. Non-compliance can result in fines and Airbnb delisting. Always check your municipality's current short-term rental bylaw before listing.
KOHO's business account helps Canadian Airbnb hosts track rental income, pay for cleaning and supplies, and set aside HST and income tax automatically.