September marks back-to-school, and near the University of Victoria signs are posted asking local residents to consider renting out their spare rooms to students. The shortage of rental housing and lack of on-campus student housing reaches a crisis point each year, but this year seems particularly frenzied. We have spoken with realtors who are showing homes for sale to parents of post-secondary students because they simply cannot find a place for students to rent or the rental rates are so exorbitant that it makes more sense for mom and dad to buy an investment property for their adult children to live in while studying in Victoria.
A lot of people ask Canwest Accounting about the tax implications for housing student renters into their home. Sharlane Bailey, Owner of Canwest Accounting, runs through a few different scenarios. Each has pluses and minuses from a tax perspective.
The only scenario where someone can receive money to house a student and not have it considered income is by participating as a host family in a homestay program. Organized through public school districts, colleges, universities and private ESL schools, hosts are expected to provide students (usually international students) with a furnished bedroom including a desk, as well as meals, and include them in any family outings or activities, so they gain an authentic Canadian experience.
“Homestay programs often state that host families cannot use the proceeds they receive as income; therefore, it can’t be claimed as income,” Sharlane says. “The expectation is that you will make the student a part of the family. Often after you’ve fed them and taken them on family trips and activities, you break even, but the experience is incredibly rewarding.”
Since hosts don’t claim the earnings, they also can’t claim expenses, such as food, movie tickets, parking, utilities, or travel expenses if the student accompanies the family on a trip.
Room Rentals and Secondary Suites
Whether you rent out a room in your house or an entire basement suite, the Canada Revenue Agency (CRA) requires homeowners to claim the rent as earnings, which will be taxed as part of your annual income. However, there are also tax deductions homeowners can claim. Based on the square footage of the rental space compared to the rest of the house, a percentage of expenses, such as property taxes, utilities, mortgage interest, hydro, natural gas, and water can be deducted. For example, if the bedroom being rented is 10’ x 10’ in a small 1,000 square foot home, then 10% of these household bills can be claimed as expenses. However, Sharlane makes clear that these expenses do not include gardening bills or compensation for cleaning the house. If you hire someone to specifically clean the rental space, that can be claimed. Any furniture, paint, carpets, bedding, and even light fixtures specifically purchased for the rental room or suite can also be a tax deduction.
If you have any questions, or to have the exceptional team at Canwest Accounting save you time and money by doing your bookkeeping, tax planning for your business, payroll and tax filings call or email us. Our offices in Victoria and Langford are still closed to the public to keep everyone safe during the COVID-19 pandemic, but we have a pickup and drop off service that is very convenient.
The suggestions and advice provided by Canwest Accounting should not be relied upon in place of professional advice. You are responsible for checking the accuracy of relevant facts and opinions provided.