Short-Term Rentals Just Got a Lot More Expensive (And You Might Not Even Know It)

Tax season is coming, and if you've been running an Airbnb or short-term rental in Ontario, you need to read this.

We're sharing insights from our friends at Zinati Kay Real Estate Lawyers because these changes aren't theoretical. They're real rules that can cost you thousands if you're not aware of them.

Here's What Changed

1. Your Airbnb Could Trigger HST When You Sell

Most people assume selling your house or condo is HST-exempt. And usually, it is.

But if you've been running it as a short-term rental? The CRA might consider that commercial use. Which means you could owe HST on the entire sale price.

This isn't just about purpose-built rental properties. It applies to regular condos and houses that were frequently listed on Airbnb or VRBO.

The reality: Sellers are getting hit with surprise tax bills at closing because they didn't realize their rental activity crossed into commercial territory.

2. No License? No Tax Deductions.

Starting in 2023, if your short-term rental isn't compliant with provincial or municipal rules (licensing, zoning, permits), the CRA can deny your expense deductions.

There was some transitional relief if you got compliant by the end of 2024. But from 2025 forward, non-compliance means no deductions during that period.

What this means: Your taxable income goes up. Your tax bill goes up. Even if your rental was profitable, you're paying more because you weren't licensed.

3. How You Use Your Property Matters More Than Ever

The CRA is now scrutinizing property use during audits. Frequent short-term rentals, mixing personal and rental use, or changing how you use the property over time can all affect:

✅ Your GST/HST status✅ What expenses you can deduct✅ Your reporting obligations

Bottom line: Tax exposure doesn't just happen at sale. It's about how you've been using the property all along.

What Should You Do?

If you're operating a short-term rental or thinking about selling a property that's been rented out:

1. Talk to your accountant about how your rental activity might affect your tax situation

2. Make sure you're compliant with all local licensing and zoning requirements

3. Get legal advice before listing if your property has been used for short-term rentals

We work closely with accountants and real estate lawyers for exactly these situations. If your mortgage is tied to a property with changing use or tax complications, we can help you understand your options.

Need to chat? Never be too shy to call. These issues are complicated, but there are people who can help you navigate them.

Want to dig deeper?

Canada Revenue Agency has detailed info on:

• Changes to short-term rental deductions

• Sharing economy and platform taxes

• GST/HST and rental income

(Links available at canada.ca/en/revenue-agency)

Thanks to Zinati Kay Real Estate Lawyers for sharing these insights. We don't do taxes or legal work, but we know great professionals who do. And when mortgage advice intersects with tax or legal questions, we make sure our clients are connected with the right people.