Personal Finance

Homestay income: Is it taxable?

Deal Guru
User avatar
Mar 31, 2008
13011 posts
3095 upvotes
Toronto
From what I can recall, if you're income is below a certain threshold, and you live at the address, taxes are minimal.

Either way, it is very easy to write off expenses. Taxes, utilities, TV, internet, any repairs, in this case food. Mortgage interest if you have it.


People do not comprehend that you don't charge the marginal cost, you charge a % of the total costs. So if that person takes up a room, and there are 4 rooms in the house, then you can allocate 25% of total household expenses. Or if 3 people, 1/3 is 33%. You don't also distinguish between how many people there are.

So you can claim 50% by insinuating it was 2 people you were renting out too (they're not going to try to track down tenants to confirm). Often, it can easily be greater than your rental income, or small enough that any taxes are minuscule.
Sr. Member
Nov 5, 2013
624 posts
122 upvotes
[quote="at1212b" post_id="18775662" time="1399349993" user_id="151872"]From what I can recall, if you're income is below a certain threshold, and you live at the address, taxes are minimal.

Either way, it is very easy to write off expenses. Taxes, utilities, TV, internet, any repairs, in this case food. Mortgage interest if you have it.


People do not comprehend that you don't charge the marginal cost, you charge a % of the total costs. So if that person takes up a room, and there are 4 rooms in the house, then you can allocate 25% of total household expenses. Or if 3 people, 1/3 is 33%. You don't also distinguish between how many people there are.

So you can claim 50% by insinuating it was 2 people you were renting out too (they're not going to try to track down tenants to confirm). Often, it can easily be greater than your rental income, or small enough that any taxes are minuscule.[/QUOTE


If you rent out a room of your home, you are restricted on the expenses you can claim for the shared space. You can base it on factors such as availability or the number of persons sharing the room. For example, if there were three family members and one lodger, you could claim 25% of the expenses for the use of the shared area or rooms. You also need to calculate the percentage based on square footage of the lodger’s exclusive-use rooms and then claim a portion of the related expenses.

The easiest way is by calculating the square footage of the house being used for rental. That will give you a place to start in terms of how to allocate expenses as well. The other thing to consider is if there are shared portions of the home — such as the kitchen, bathroom or laundry facilities — you can’t automatically say those areas belong to the rental because there is typically also going to be a personal use portion. The CRA requires the homeowner to indicate what percentage of time the renter is using those shared spaces. Is the laundry being used two days a week or 50 per cent of the time? Is the kitchen being used only half of the time? That’s where it’s a good idea if you are renting out part of your home to give the tenant their own bathroom. That way it’s easier to determine what percentage is part of the rental.

People with a rental unit in their principal residence will need to pay capital gains on the portion of the house being rented when they sell. So, if a basement apartment takes up 20 per cent of the square footage of a home, you need to calculate the capital gain on 20 per cent of your home when you sell. Since you are using space in your principal residence to earn income, you lose the capital gains exemption on this part of the house. However, you would not lose the exemption if the rooms you were renting out did not constitute a separate unit and you do not claim capital cost allowance.
Newbie
May 17, 2011
19 posts
TORONTO
fungery wrote:
People with a rental unit in their principal residence will need to pay capital gains on the portion of the house being rented when they sell. So, if a basement apartment takes up 20 per cent of the square footage of a home, you need to calculate the capital gain on 20 per cent of your home when you sell. Since you are using space in your principal residence to earn income, you lose the capital gains exemption on this part of the house. However, you would not lose the exemption if the rooms you were renting out did not constitute a separate unit and you do not claim capital cost allowance.
I just discovered this conversation and it includes the partial answer to a question that I've had. We have taken in homestay students in the past few years and we have claimed the income and expenses on our tax returns. My question is about capital gains on the future sale of our home. My wife and I are seniors and will be selling our home some time in the future. We have lived in our home for 15 years and it has appreciated in value. How can we determine (in a general way) our potential capital gains loss because of our homestay income? Let's say our home appreciated by $250,000 in the 15 years that we have owned it. We claimed our income and expenses for our students during 3 years (average income about $8000/year). If we were to sell our house this year, what might we expect to pay in capital gains? This situation never occurred to us until recently. We have also considered joining Air B&B and now wonder if this would be advisable. Thanks for your opinions.
Sr. Member
Jun 5, 2007
973 posts
205 upvotes
York
foldart wrote: I just discovered this conversation and it includes the partial answer to a question that I've had. We have taken in homestay students in the past few years and we have claimed the income and expenses on our tax returns. My question is about capital gains on the future sale of our home. My wife and I are seniors and will be selling our home some time in the future. We have lived in our home for 15 years and it has appreciated in value. How can we determine (in a general way) our potential capital gains loss because of our homestay income? Let's say our home appreciated by $250,000 in the 15 years that we have owned it. We claimed our income and expenses for our students during 3 years (average income about $8000/year). If we were to sell our house this year, what might we expect to pay in capital gains? This situation never occurred to us until recently. We have also considered joining Air B&B and now wonder if this would be advisable. Thanks for your opinions.
Have you ever claimed CCA on the homestay income? Assuming that you have not then the principal residence exemption will still be used against all capital gains.
Newbie
User avatar
Jul 4, 2016
27 posts
35 upvotes
Riverdale, Toronto, …
We've been wondering about this question for a while. A homestay website posted something relevant. Rather than paraphrasing, here's what they wrote:
Is my host allowance taxable?

Added by Jennifer Wilson over 2 years ago

It's that time of year again, and many hosts are asking us about taxes and the host allowance.

Answer:

As much as we would like to give you a simple answer to this question, we are not accountants and we cannot offer tax advice.

Having said that, we can tell you that:

CHN does not issue T4s, T4As, or any other kind of written statement regarding the payments you have received during the year. The only documentation regarding payments is given to you in the form of your direct deposit “payment advice” emails. If you would like CHN to send you a summary of your payments from the year, please just ask and we would be happy to do so.

Even though we don’t issue T-slips, CHN is obligated to report payments to hosts if the CRA asks. In other words, this information is not considered confidential or private when it comes to the CRA.

Any income is considered taxable and should be reported, but in Canada we only pay taxes on our net income after expenses. This is where your friendly accountant can offer you expert advice about how best to report your income and what sorts of expenses can be considered deductions against that income.

For further information, please call the CRA at 1-800-267-6999 to inquire about your personal tax situation.
http://servicehub.canadahomestayinterna ... topics/270
Sr. Member
Jun 27, 2012
913 posts
100 upvotes
Winnipeg, MB
Just because some organization doesn't issue a tax receipt/notice doesn't mean anything. It could still be taxable. I would think that you should claim the income as rental income minus a reasonable amount for expenses. But who knows? You'd have to call Rev Can. I'm trying their 800-959-8281 but its endlessly busy. Guess they reduce staff after tax deadlines.
Deal Addict
User avatar
Dec 14, 2007
3105 posts
1530 upvotes
redflagguy2u wrote: "not meant to be for profit activity".....that's hilarious. People are getting about 30-40% more for their space (after food costs) than if they rented to a local person. Here in my city rooms that Homestay provides for $650-700 often rent for $350-450. Food does not cost that much. And if you're already preparing a meal for your family its very easy to just prepare a little more for any student(s) you may have. Plus they often pay a whole year in advance so you don't have to chase them for the rent money each month unlike broke Canadians. AND you meet some very respectful, disciplined and interesting young people. If you're not a people person its not worth it of course. But its definitely lucrative. And it should be taxed though I suppose people would argue how much of the total is spent on food. I don't think anybody is assuming the entire amount is spent on food! I doubt if many people expend more than $150/mo on food for each student though.
It's not just about the cost of the food.

Homestays are coming to STAY with a family. I realize lots of people treat homestay students as "cash cows" but I despise those arrangements. For example, going on outings and charging a homestay doesn't make sense to me. That's part of the DEAL. You charge more than renting because it is more work. Sure, if you're already making a meal for a family every day, it's potentially not a lot more work when it comes to meals, but the homestay meal is more of an obligation. The whole point of homestays is that the fee is meant to cover expenses and services. If you charged properly for your time and expenses, there would be 0 profit.

In any case, there are FAR more expenses that you would be able to write off. Everything from toilet paper to gas used to go grocery shopping. You can easily making homestays a net-zero income situation, unless you're essentially running a boarding house where you have 3-4 homestays.

Curious. What city are you in, OP?

I also haven't met any homestays that pay a year in advance. Ugh, there are so many BAD homestay families in Vancouver... many worse than slum lords.
Sr. Member
Jun 27, 2012
913 posts
100 upvotes
Winnipeg, MB
Absolutely. Its a miracle getting any intelligence on Yahoo Answers. Biggest collection of idiots I've ever encountered online. :) About as opposite from RFD as you can get. Probably because its general in nature. The best forums have specific themes.
Sr. Member
Jun 27, 2012
913 posts
100 upvotes
Winnipeg, MB
> Curious. What city are you in, OP?

Winnipeg. Our costs are so much less than Vancouver it may not bring out so much of the greed as there. For sure, there are many households that don't treat the students well and probably bully them to get what they want. Its very unfortunate. Especially when people don't speak English well. It isolates them and they rarely seek out help.
Sr. Member
Jun 27, 2012
913 posts
100 upvotes
Winnipeg, MB
So if you can write down the food costs (would you have to retain all grocery store receipts?) that might be helpful. Still you're left with a rental payment amount that sounds like its taxable. Unless it can be classified as boarding in nature as a previous poster suggested. I guess its all in how its classified.
Sr. Member
Jun 27, 2012
913 posts
100 upvotes
Winnipeg, MB
I bet most of the people that don't declare Homestay or Boarding revenue on their tax return do so because they are actually renting an illegal suite. This point has been made many times in other areas. One gray area causes people to hide revenue or information in other areas.

Can you imagine the business activity if there weren't these complications and income tax was simple. A flat or semi-flat tax that encouraged productivity, that didn't stifle it by taxing you more if you were more successful. And a system with absolutely no deductions or write-offs. Just a very simple tax on revenue. Everybody would have their own little business and be having fun operating it. Reading this thread just shows all the rules and regulations that just strangle business hope, faith and incentive. And the sad thing is its true in almost every developed country on the planet.

The government should protect us from pollutants and personal danger and crime. And stay out of our money! If they did that people would be just so productive and inventive. They would feel like they actually control their own lives. They could project income quickly. If they made so much they would know exactly how much tax they would pay. But in today's world you need a degree in accounting to even guess the approximate revenue. So because the reward isn't clear people often don't bother. Especially with their own money. And when you invest other people's money you are never as diligent as you would have been if it had been your own cash saved up over years of disciplined work.

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