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Other Tax Obligations From Operating a Tourist Accommodation Establishment

If you earn income from renting out an accommodation unit, you may have obligations in specific situations. See below for more information. 

Change in use

If you convert all or part of a property that you use as your principal residence into rental or business income-producing property or, conversely, you start using income-producing property as your principal residence, this results in a change in use. 

At the time of the change in use, you are deemed to have disposed of the converted property (or part of the property) for proceeds equal to its fair market value (FMV) and to have reacquired the property immediately thereafter at a cost equal to its FMV. 

A change in the use of property constitutes a form of deemed disposition that may result in a capital gain that you must normally report in the taxation year in which the change took place. 

For information on all your obligations when a property's use changes, see Change in Use of a Principal Residence or Income-Producing Property and Change in Use of an Immovable.

Designation of a principal residence

If you convert your principal residence into income-producing property, you must complete form TP-274-V, Designation of Property as a Principal Residence, and enclose it with your income tax return for the year in which the change took place. You can use the form to calculate the part of any capital gain that is subject to income tax.

However, you can choose not to apply the change-in-use rules. If you make this choice for federal purposes, it also applies for Québec purposes.

For more information, see guide IN-120-V, Capital Gains and Losses, and guide IN-100-V, Individuals and Rental Income.

Note that a residence that was used for short-term rentals can be designated a principal residence if it meets certain criteria.

Sale of an immovable

You must report the sale of a property (also known as a “disposition”) in the taxation year in which the transaction took place (generally the calendar year). This rule applies to all disposed property whether it is used for personal, business (regardless of the fiscal year end date) or income-producing purposes. In addition, if you sell a property that is not considered a residential complex, you must collect the GST and QST.

The sale of a personal-use or income-producing property creates a capital gain or a capital loss. 

For more information, see guide IN-120-V, Capital Gains and Losses, and Selling Your Property.

Note Be sure to follow all rules!

You have a number of obligations regarding short-term accommodations. To make sure you're meeting them, our inspectors can visit your establishment without prior notice. However, they must get your consent before entering your residence. For more information, see guide IN-259-V, Inspections of Tourist Accommodation Establishments. For inspection statistics, see Activités d'inspection dans le secteur de l'hébergement touristique (in French only).

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