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Tax in the News – Rethinking the Tax Approach to Short-term Rentals

The recent proposal by the federal government targeting short-term rental owners is raising significant concerns, especially among family-owned enterprises that have relied on this market to supplement their retirement income. As a CPA and Tax Law expert, I find this approach not only counterproductive but also potentially damaging to the very fabric of entrepreneurial spirit that drives our economy.

The Proposed Tax Changes and Their Impact

The government’s proposal to deny tax deductions related to short-term rental properties sets a dangerous precedent. Taxing business owners on their gross income, without allowing for deductions of related expenses, is not only unfair but also an unreasonable expectation. This approach neglects the fundamental principles of business taxation, where expenses incurred in the generation of income are typically deductible.

The Importance of Short-term Rentals for Family Enterprises

Many family-owned businesses have ventured into the short-term rental market as a means to supplement their income, particularly as they approach retirement. These rentals often serve as a critical component of their retirement planning, providing necessary financial support. The proposed changes could significantly diminish the attractiveness of this investment, potentially derailing the retirement plans of numerous small business owners.

The Broader Economic Implications

This proposal could inadvertently lead to fewer property owners declaring their rental income, thereby reducing transparency and compliance within the short-term rental market. It could also discourage investment in this sector, which has been a vital part of the housing solution in Canada, providing flexible accommodation options for tourists and residents alike.

A Call for Reasonable Taxation Policies

In an economic climate where small businesses are already navigating numerous challenges, including an inflationary environment, additional tax burdens seem particularly unwarranted. A more balanced taxation policy, which recognizes the legitimate expenses incurred in maintaining and operating rental properties, would be a fairer approach. Such a policy should aim to support, rather than hinder, the growth and sustainability of small family-owned enterprises.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2023 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.

Nizam Shajani, Partner, LLM, CPA, CA, TEP, MBA

I enjoy formulating plans that help my clients meet their objectives. It's this sense of pride in service that facilitates client success which forms the culture of Shajani CPA.

Shajani Professional Accountants has offices in Calgary, Edmonton and Red Deer, Alberta. We’re here to support you in all of your personal and business tax and other accounting needs.