St. John's 
The Canada Revenue Agency (CRA) is reminding Canadians of the significant changes to tax rules for short-term rental properties, effective after the 2023 tax year.
These updates will affect taxpayers who rent out residential properties for periods of less than 90 consecutive days. Here’s what you need to know.
Key Changes
Starting in 2024, taxpayers cannot claim income tax deductions for expenses related to non-compliant short-term rentals. Non-compliance refers to rentals in locations where such activities are prohibited by provincial or municipal regulations, or where the property lacks the necessary permits, licenses, or registrations.
Short-term rentals include residential properties such as houses, apartments, condominiums, and cottages offered for rent for less than 90 days. Properties used for such purposes must comply with local laws governing short-term rentals.
Impact on Deductions:
You can deduct reasonable expenses to earn rental income, categorized as current or capital expenses. Deductible costs include advertising, insurance, repairs, utilities, salaries, property taxes, and professional fees. Some expenses are non-deductible. Special rules apply to modifications for disabilities or older properties.
Under the new rules, only expenses tied to compliant rentals can be deducted. For non-compliant rentals, a formula determines the non-compliant amount that cannot be deducted:
Non-Compliant Amount= (A×B)÷C
- A: Total deductible expenses for the year
- B: Number of non-compliant rental days
- C: Total rental days in the year
For instance, a property rented out for 300 days in 2025 at $250 per night, generating $75,000 in revenue, incurred $60,000 in expenses. If the property was non-compliant for 181 days, the non-compliant portion of expenses is $29,753 ($60,000 x 181 ÷ 365). The taxpayer can only deduct $30,247 in expenses, leading to a taxable profit of $44,753 ($60,000-$29,753+15,000).
Transition Relief for 2024
To ease the transition, the CRA allows deductions for the full amount of expenses in 2024 if the property becomes compliant by December 31, 2024.
It is important to keep accurate records to prove compliance, including documentation of licenses and permits. The CRA may audit to ensure deductions align with the new regulations.
For more information on rental expenses and compliance, visit the CRA website.
in the sample calculation for STR eligibility to claim expenses, should C be 300 instead of 365? (place was rented for 300 days).
C is Days the property was available as a short-term rental in the year not total number of days it was rented, hence 365. News release — https://www.newswire.ca/news-releases/tax-tip-changes-to-rules-for-eligible-deductions-from-short-term-rental-income-861286175.html