Understanding the income tax implications of sharing your space

Turning your spare bedroom into a safe, affordable student housing option can be a great way to earn extra income and enrich your life through intergenerational homesharing. Understandably, before you get started, you may be thinking of the key income tax implications involved. That’s why we created this overview to help guide you through the key financial aspects of participating as a host with SpacesShared.

Report rental incomeWhen you rent out a room, the money you receive is considered rental income. This income must be reported on your annual income tax return, and you should have accurate records of the rental payments you receive, as this information will be needed when filing your taxes.

In most Canadian communities, rooms could be rented between $800 and $1400. The average host on SpacesShared collects about $700 in rent.

Use expenses to offset rental incomeAs a homeowner renting out a room, you can deduct certain expenses related to the rental property. These may include a portion of your mortgage interest, property taxes, utilities, and maintenance costs. However, the expenses must be directly related to the rental space, and you can only claim the portion that corresponds to the rented area. For example, if the rental area is approximately 20 percent of the total living area, then you could claim 20 percent of the related expenses against the rental income, lowering the taxable amount.

Keep records and receiptsAlthough you do not need to submit every receipt and invoice, you will need to keep track of your expenses and hold on to your files for six years in case Canada Revenue Agency (CRA) asks to see them. Examples of the detailed records you’ll want to keep on hand include:

• Invoices (including your SpacesShared records)
• Receipts
• Contracts
• Other supporting documents (e.g. repairs or improvements)

CRA may not allow all or part of your expenses if you do not have receipts or other documents to support them.

Complete the T776 FormTo report your rental income and claim eligible expenses, you'll need to complete the T776 form, Statement of Real Estate Rentals. This form provides a detailed breakdown of your rental income and expenses. It's important to fill out this form accurately to ensure compliance with Canada Revenue Agency (CRA) regulations.

Renting out a room in your home can be a financially and personally rewarding idea. Understanding the rules and regulations surrounding rental income in Canada will help you make informed decisions, and feel that much more comfortable opening your home to a student who could use your help. While this has been a general overview (and is not to be considered advice), your unique situation may need more personalized guidance. That’s why you should always consult with a tax professional, first.

‍