To AirBNB or not AirBnB? Tax Considerations · Mr. Johnson rented the condo through Airbnb...
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To AirBNB or not AirBnB? Tax Considerations Presented By: Melinda Fleming, BA, Cert Senior Manager, Indirect Tax p. 902-491-7743 e. [email protected] Teresa Gannon, CPA, CA Senior Manager, Tax p. 902-491-7483 e. [email protected] 1
Transcript of To AirBNB or not AirBnB? Tax Considerations · Mr. Johnson rented the condo through Airbnb...
ToAirBNBornotAirBnB?TaxConsiderations
PresentedBy:
MelindaFleming,BA,CertSeniorManager,IndirectTax
TeresaGannon,CPA,CASeniorManager,Taxp.902-491-7483
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Salestax• Realpropertysupplies–whatistaxable/whatis
exempt?• Salestaxregistrationandrecovery• Saleofrealpropertyusedinshort-termrentals• Determiningextentofuse• examples
Incometax• Typeofproperty• Principalresidence• Partialportionofprincipalresidence• Incomeandexpenses
Agenda
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Taxablesuppliesofrealproperty:• thesupplyofnon-residential/short-termrentals• thesaleofrealpropertyusedprimarily(morethan50%)in
short-termrentalsincludingBedandBreakfastoperations
Exemptsuppliesofrealproperty:• residentialrentwherethepurposeofoccupancyisasa
placeofresidenceorlodgingbythesameindividualunderthearrangementforatleastonemonth
• thesaleofusedresidentialpropertyusedprimarily(more
than50%)asaplaceofresidenceincludingBedandBreakfastoperations.
Realpropertysupplies–whatistaxableandwhatisexempt?
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Salestaxregistrationandrecovery
WhenmustapersonregisterforHST?• Incomefromshort-termrentals>$30,000overfour
consecutivecalendarquarters–RequiredtoregisterandchargeHST
• Ifincomefromshort-termrentals<than$30,000overfourconsecutivecalendarquarters,notrequiredtoregisterorchargeHST
Canapersonrecovertaxpaidonexpenses?
• IfregisteredforHSTrecoveryisavailablebasedontheextentofuseofthepropertyinshort-termrentaldependingonthetypeofexpenditure
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Recap-saleofrealpropertyusedinshort-termrentals
Taxablesalesofrealproperty:• wherethepropertywasusedprimarily(morethan50%)
inshort-termrentalactivity
DoesHSTregistrationstatusmatter?• generally,whethervendorisregisteredforHSTornot,
thesalewillstillbetaxablewherethepropertyisusedprimarilyinshort-termrentals.
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Determiningextentofuse
Howdoyoudeterminewhetherornotthepropertymeetstheprimarytest?• CRAdoesnotprescribeanymethod,simplymust
be'fairandreasonable'
• Daysusedpersonallyvs.daysrented(note:amethodthatautomaticallyconsidersallunoccupieddaysasdaysforuseincommercialactivitiesisnotgenerallyacceptedbyCRAasfairandreasonable)
• SquarefootageconsiderationsforBNBtypepropertieswhereapersonrentsout'rooms'intheirprimaryresidence.
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Example1
Mr.JohnsonboughtanewcondoindowntownHalifax.HisintentionwastousethepropertytorentthroughAirbnbonfulltimebasis.HisaccountantadvisedthatheshouldregisterforHSTandtoself-assesstaxonthepurchase(remittaxonthepurchaseandclaimedaninputtaxcreditonthepurchase).Mr.JohnsonrentedthecondothroughAirbnbthroughouttheentireyear.Inthefollowingyear,therealestatemarketsoaredinHalifaxandMr.Johnsondecidedtogetoutofthebusinessandsellthecondo.Clearlythisisabusiness.Thefactthatheusedthepropertyfullyinshort-termrentalswouldcausethesaletobetaxable.
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Example2
Mrs.SmithboughtausedcondoindowntownHalifaxtoliveinduringa5monthworkcontractasherpersonalresidence.Duringtheother7months,shedecidedshewouldlistthecondoweeklythroughAirbnb.ShedidnotpayanyHSTwhenshepurchasedtheproperty–itwasanexemptpurchase.Mrs.Smithdidnotexpecttoearnmorethan$30kayearfromshort-termrentalincome,soshedidnotregisterforHST.Mrs.Smith'sworkcontractendedthefollowingyearsoshedecidedtoselltheproperty.EventhoughMrs.SmithwasnotregisteredforHST,nordidsherecoveranytaxonpurchaseorimprovementstotheproperty,thesubsequentsalewouldattractHSTassheuseditprimarily(morethan50%)inshort-termrentals.
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Example3
Mr.JoneshasownedandlivedinhishouseinHalifaxforanumberofyears.HerecentlyretiredanddecidedthatHalifaxwastoocoldinthewinter,sohewouldspendfourmonthsoftheyearinFloridainstead.Duringhistimeaway,hefiguredhecouldrentouthishouseweeklyforthefourmonthsandmakesomeextramoneytofundhistimeaway.Heneverexpectedtoexceedthe$30kinshort-termrentalincome,soheneverregisteredforHST.TheplanwassuccessfulandMr.Jonesrentedhishomeoverthefullfourmonthshewasawayonaweeklybasis.Thefollowingyear,Mr.JonesdecidedthathelikedthewarmweathersohewouldmovetoFloridaandsellhishouse.Sincethehousewasusedmorethan50%ashispersonalresidencethroughouttheyear,thesubsequentsalewouldbeexemptoftax.
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Example4
Mr.andMrs.Smithownafourbedroomhouse.Theirchildrenhaverecentlymovedout,sotheydecidetorentoutthreeofthefourbedroomsintheirhomeonAirbnbonanightlybasis.Theydonotexpecttoexceed$30kinshort-termrentalincome,sotheydonotregisterforHSTorrecoveranytaxonexpensesincurredtorentouttherooms.Thehouseisa3,000squarefootproperty.Mr.andMrs.Smithoccupy2,000squarefeetofthepropertyfortheirkitchen,livingspaceandpersonalbedroom.Thethreerentalbedroomstakeuptheother1,000squarefeetofthehouse.Inthefollowingyearafterrentingthepropertyinthismanner,Mr.andMrs.Smithdecidetosellthehouse.Inthiscase,thesubsequentsaleofthepropertywouldnotattracttaxasthepropertyhasprimarilybeenusedasMr.andMrs.Smith'spersonalresidence.
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IncomeTax
Typeofproperty• Separatebuilding• Entireprincipalresidence• PartialportionofprincipalresidenceEntireprincipalresidenceDoyouhaveachangeinuseoftheproperty?Restrictions:• CannotclaimCCA• Canonlyreportupto4yearsunlessother
criteriaaremet• Mustreportallearnings• Cannotreportanyotherpropertyasyour
principalresidenceduringthistime.
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Entireprincipalresidence
Doyouhaveachangeinuseoftheproperty?Restrictions:• CannotclaimCCA• Canonlyreportupto4yearsunlessother
criteriaaremet• Mustreportallearnings• Cannotreportanyotherpropertyasyour
principalresidenceduringthistime
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Partialuseofyourprincipalresidence
DeemeddispositiononthepartialportionatfairmarketvalueConditions:• Theincomeproducinguseisancillarytothe
mainuseofthepropertyasaresidence• Nostructuralchangestotheproperty• NoCCAhasbeenclaimed
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ClaimingIncomeandExpenses
Income• RentalincomeorBusinessIncomeExpenses• Deductions• Proratedcosts• Capitalexpenditures• Repairsandmaintenance
Questions?
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