Starting January 1, 2024, expense deductions for short-term rentals will be denied if the property is deemed non-compliant. These changes target properties that do not comply with provincial or municipal requirements.
Key Points:
- Definition of Non-Compliant Short-Term Rentals:
- Properties must be rented for less than 90 consecutive days to qualify as short-term rentals.
- Rentals are deemed non-compliant if:
- They violate local municipal or provincial rules (e.g., zoning prohibitions).
- They lack required permits, licenses, or registrations.
- Properties can avoid penalties if compliance is achieved by December 31, 2024.
- Impact on Deductions:
- Expenses like property taxes, interest, maintenance, and other costs will no longer be deductible if the rental is non-compliant.
- Gross rental income must still be reported, significantly increasing the taxable income and potential tax liability for non-compliant properties.
- Compliance Requirements:
- Owners are urged to check local regulations and ensure proper permits or licenses.
- The rules primarily target residential properties offered as short-term rentals through platforms like Airbnb or Vrbo.
- Grace Period for Compliance:
- Operators have until the end of 2024 to comply with registration and licensing requirements to avoid retroactive penalties.