Airbnb and Short-Term Rental Income in Ontario: Tax and HST Rules

Renting out your home — or a second property — on Airbnb or a similar platform can generate meaningful extra income. But Airbnb short-term rental income tax in Ontario comes with real complexity: the rules around income reporting, HST registration, deductible expenses, and your principal residence exemption are all different from long-term renting. Get it wrong and you may owe back taxes, interest, and penalties.

This guide explains the key rules in plain language. It is general information, not tax advice — your specific situation matters enormously, and we recommend working with a licensed accountant alongside any legal advice you receive.

Short-Term vs. Long-Term Rentals: Why the Distinction Matters

The Canada Revenue Agency (CRA) and Canadian tax law treat rentals differently depending on how long each tenant stays. The dividing line is 30 consecutive days.

• Long-term rental (30 days or more): Considered a residential rental. Generally exempt from HST under the residential rental exemption. Income is usually reported as rental income on your T1 return.
• Short-term rental (fewer than 30 consecutive days): The HST exemption does not apply. Short-term rentals are treated more like a hotel or hospitality service — which has significant tax consequences (see below).

This is the rule as of writing — confirm current CRA guidance before filing.

Reporting the Income on Your T1 Return

All rental income you earn in Canada is taxable and must be reported on your personal T1 return. The question is how to report it.

Rental Income vs. Business Income

Most Airbnb hosts report their earnings as rental income (on the Statement of Real Estate Rentals, T776). However, if the CRA decides your short-term rental operation looks more like a business, the income must be reported as business income instead — which has different rules around deductions and self-employment contributions.

CRA looks at factors like:

• How often the property is rented and for how long each stay
• The range of services you provide (cleaning, meals, concierge-style services, etc.)
• Whether you advertise actively and operate in a commercial manner
• Whether you employ others to help manage bookings or clean

The more your operation resembles a hotel or B&B, the more likely CRA is to treat it as a business. If you are unsure which category applies to you, speak with an accountant before filing.

Deductible Expenses — and How to Prorate Them

One of the advantages of earning rental income is the ability to deduct legitimate expenses. Common deductibles include:

• Mortgage interest (not principal repayment)
• Property taxes
• Insurance (the rental-use portion)
• Utilities (electricity, heat, water)
• Maintenance and repairs
• Cleaning costs
• Platform fees charged by Airbnb or similar services
• Advertising costs

Proration for Mixed Personal and Rental Use

If you rent out part of your home (say, a basement suite or a spare bedroom) or rent the whole property only some of the year, you must prorate expenses between personal and rental use.

For example, if you rent a room that represents 25% of your home's square footage, you can generally deduct 25% of shared expenses like heat and insurance. If you only rent for six months of the year, apply that time factor as well.

Keep clean records of all expenses and the rental calendar — the CRA may ask for documentation.

HST: The Rule Most Airbnb Hosts Miss

This is the area where Ontario short-term rental hosts are most often caught off guard.

The Residential Rental Exemption Does Not Apply

Under federal and Ontario tax rules, long-term residential rentals (30 days or more) are exempt from HST. Short-term rentals — under 30 consecutive days — do not qualify for this exemption. Each guest stay is treated similarly to a hotel booking, meaning HST may apply to the rental charge.

The Small Supplier Threshold

If your total taxable revenues (from all sources, not just rental) fall below a certain threshold in any 12-month period, you may qualify as a small supplier and are not required to register for or collect HST. As of writing, that threshold is in the range of $30,000 — confirm the current figure with CRA or an accountant, as thresholds can change.

Once you exceed the threshold, you are required to register for an HST number, charge HST on your short-term rental income, and remit it to CRA on a regular basis. Failing to register when required can result in penalties and interest.

What Airbnb Collects on Your Behalf

Airbnb and similar platforms may collect and remit some taxes in Ontario under agreements with tax authorities. However, platform remittances do not replace your personal CRA obligation. You are still responsible for:

• Knowing whether you need to register for HST independently
• Reporting all income to CRA — including amounts Airbnb has already collected taxes on
• Filing HST returns if you are a registrant

Do not assume that because Airbnb handled the tax collection, your obligations are fully met. Confirm your position with an accountant.

Your Principal Residence Exemption May Be at Risk

If you sell a property that you have used as your principal residence, you may be entitled to the principal residence exemption (PRE), which shelters the capital gain from tax. Renting out your home — even short-term — can partially reduce your ability to claim the PRE for the years it was rented.

The rules here are nuanced and fact-specific. Speak with a tax professional before selling a property you have rented on Airbnb.

Ontario's Municipal Accommodation Tax (MAT)

Separate from federal and provincial income tax and HST, many Ontario municipalities have introduced a Municipal Accommodation Tax (MAT) on short-term accommodations. In some cities, Airbnb collects and remits this on your behalf; in others, you may have independent obligations. Check with your municipality for the current rules in your area.

Record-Keeping Tips

Good records protect you if CRA reviews your return. Keep:

• A rental calendar showing check-in and check-out dates for every guest
• All receipts for expenses (digital copies are fine)
• Records of any amounts Airbnb collected or remitted on your behalf (downloadable from your host dashboard)
• A log of any personal use of the property during the year

Frequently asked questions