Thinking of selling your Airbnb property? You might be in for a surprise—taxes. The Tax Court of Canada recently ruled that if you’ve been renting out your property on Airbnb or any other short-term rental platform, you could be required to pay GST/HST on the sale. This could come as a shock, especially if you thought your property was exempt under residential tax rules.
Let’s break down what happened and why this matters for you.
P.S. I am NOT a tax accountant so I would highly, highly recommend you get in contact with one to confirm what taxes you owe. This Post is for getting the conversation started in a very important topic.
The Ruling That Changed the Game
In a recent case, a property owner who rented out a condo on Airbnb was hit with GST/HST when they sold the property. The owner originally leased the condo for long-term rentals (over 60 days), which made it exempt from sales tax under the residential complex exemption. But when the owner switched to short-term rentals on Airbnb, the game changed.
The court ruled that the property was no longer considered a residential complex at the time of sale because it was being used more like a hotel than a long-term rental. As a result, the sale of the property was considered a taxable supply—meaning GST/HST applied.
Why Short-Term Rentals Are Different
If you’re renting your property on Airbnb, even for a short period, the use of the property could shift it out of the “residential complex” category. Properties like hotels, motels, and Airbnbs are treated differently for tax purposes because they’re used for short-term stays. Once your property crosses that line, it may no longer qualify for the residential tax exemption when you sell it.
In this case, the property owner had been leasing out the condo for periods of less than 60 days. Since the majority of the leases were short-term, the court determined the property was part of a commercial activity—not a residential one. And once a property is classified as a commercial asset, the sale becomes taxable.
What This Means for You
If you’ve been renting your property on Airbnb or another platform for short-term rentals, you need to think carefully about the tax consequences when you decide to sell. This court ruling is a wake-up call for anyone assuming their property sale would be exempt from GST/HST just because it’s a residential unit.
Here are a few things to consider:
- Short-term rentals (less than 60 days) could push your property into the commercial category.
- If you’ve been offering your Airbnb with services like heat, electricity, or furniture, it might further classify the property as a commercial activity.
- You may be required to pay 13% GST/HST on the sale of the property, depending on your location in Canada.
How to Protect Yourself
Selling a property that’s been used as an Airbnb comes with potential tax risks. To avoid any nasty surprises, you should:
- Track your property’s use: Keep a clear record of how long you’ve rented it for, whether short-term or long-term.
- Consult a tax professional: If you’re unsure whether your property will be classified as commercial, get expert advice. This will help you determine whether you’ll owe GST/HST.
- Understand the law: This recent case shows how small changes in property use can have big tax consequences. Knowing the rules around Airbnb and taxes can save you thousands down the line.
The Bottom Line
If you’re renting out a property on Airbnb and planning to sell it, don’t assume you’re automatically exempt from GST/HST. As the recent court ruling showed, short-term rentals could shift your property into the commercial category, making the sale taxable.
The last thing you want is to sell your Airbnb and get hit with a hefty tax bill you weren’t expecting. Do your homework and make sure you understand how your property’s use affects its tax status.
P.S. I am NOT a tax accountant so I would highly, highly recommend you get in contact with one to confirm what taxes you owe.