Do I have to pay taxes for rented housing?

In Calgary, as throughout Alberta, tax obligations on rented accommodation depend on the type of lease, the status of the parties to the agreement, and the nature of the property's use. Below is a detailed analysis of the tax rules for both parties to a rental relationship.

For tenants: Do you have to pay taxes on your rent?

1. Direct taxes on rent

  • No direct payments: Tenants do not pay taxes directly for renting a residence. Rent is not subject to GST/HST if the agreement is long-term (more than 60 days).
  • Exceptions: Short-term rentals (e.g., through Airbnb) may be subject to GST, but this tax is collected from the landlord, not the tenant.

2. Tax benefits for tenants

  • Federal tax credit: Starting in 2025, tenants may be eligible for a credit of up to $575 per year (up to $1,600 for seniors).
  • Eligibility: Low-income individuals are eligible for the credit. The amount depends on rental expenses and the region.

For landlords: taxation of rental income

1. Income reporting

  • Obligation: All rental income must be reported on your tax return (Form T776).
  • Tax rate: Income is taxed at the marginal rate (25-48% in Alberta).

2. Deductible expenses

Landlords can reduce their taxable income by deducting the following expenses:

  • Current expenses: Utilities, repairs, insurance, mortgage interest.
  • Capital cost allowance (CCA): The cost of the building and equipment can be depreciated (up to 4% per year).
  • Other expenses: Advertising, legal services, property management fees.

Important! The cost of land is not depreciated, and capital improvements (such as roof replacement) are added to the value of the building.

3. Short-term rentals (Airbnb, etc.)

  • GST/HST: Applicable if annual income exceeds $30,000. The rate is 5%.
  • Reporting: Submitted with the regular tax return.

Tax risks and special features

1. Renting below market value

  • If the property is rented to relatives at a lower price, part of the expenses may not be eligible for tax deductions.

2. Losses from rental

  • Losses can be offset against other income if the activity is aimed at making a profit.
  • Restrictions: Depreciation (CCA) cannot create or increase a loss.

3. Sale of rented property

  • Capital gains tax: Payable on 50% of the profit. If the property was your primary residence, part of the income may be exempt from taxation.

Tips for tenants and landlords

For tenants:

  • Check your eligibility for tax credits through programs such as Canada Housing Benefit.
  • Keep receipts for rent payments to verify your expenses.

For landlords:

  • Keep detailed records of income and expenses.
  • Consult with an accountant about depreciation and tax optimization.
  • For short-term rentals, register to pay GST.

Conclusion

In Calgary, tenants do not pay direct taxes on their housing, but are required to report income from renting out their property. Landlords are taxed on a progressive scale but are eligible for numerous deductions. Short-term rentals require additional attention to GST/HST. To avoid penalties, both parties should carefully follow CRA requirements and take advantage of available tax credits.