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Renting Out Part of your Home: The New Rules

Hello everyone, in today’s market of record high real estate prices many home owners are electing to rent out a portion of their homes. Whether this is to lessen the financial burden of their mortgages, place an alternative revenue stream in savings, supplement their income, or all of the above, the practice is extremely common. 

Unfortunately, the recent changes to principle resident rules have effected the rules regarding renting a portion of a home. Currently, if you change part of your home into a rental or business operation you are deemed to have sold (as far as taxation is concerned) it at a fair market value and to have reacquired it at the same amount. Furthermore, any income or loss generated by the change must be reported in the year the change occurs.

This means for homeowners who rent out part of their home that any income realized through renting part of the property in years after the change of use must be reported and will be taxable upon the sale of property. Interestingly enough, it is possible to seek exemption for the change of use rules if no structural change to the property is made to make it more suitable for rental or business or if the rental or business area is very small. These exemptions fall entirely to the discretion of the CRA and what they consider to be “reasonable.”

With these changes and more likely to follow, it is more important than ever to have an experienced tax representative at your disposal.

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Sunday, 04 December 2022