All the Numbers

Renting out a cottage

From the All the Numbers wiki · Housing

Many families rent their cottage for a few weeks each summer and use it themselves the rest of the time. The rent is income on your tax return, as for a rented suite, but the costs are split by time, not by space.

What you tell All the Numbers

You give the weeks it is rented, the weekly rate, and the weeks you use it yourself. All the Numbers takes the year's rent as weeks rented × the weekly rate, in today's dollars after any sales tax and platform fees, and spreads it evenly over the months; the year's tax is the same however it is spread.[1]

You can also give the first year it is rented and how many years, and say it is rented in the summer only. A summer-only cottage takes the year's rent in June to September and none in the other months.[2]

Which costs are deductible

A cost is deductible only to the extent it was paid to earn the rent, and personal costs never are.[3] The law splits a property used partly for income and partly for yourself by the use made of it, which for a whole cottage means time.[4] CRA gives no rule for counting the days, so All the Numbers deducts property tax, insurance, upkeep, utilities and mortgage interest in the share weeks rented ÷ (weeks rented + your own weeks), leaving out weeks it stands empty.[5] Mortgage principal is never deductible.

When the rent does not cover the costs

A cottage you also use has a personal side, and the Supreme Court has said such an activity is a source of income only when it is run in a businesslike way.[6] So in a year the rental loses money, All the Numbers deducts nothing from your other income: the costs are capped at the rent. If you run it as a business at market rates, say so and the loss is deducted.[7]

Starting to rent and the principal residence

A cottage rented from the day it is bought is split into a rented share and a personal share from the start. A cottage you already own that starts to rent would normally be treated as sold in part at its market value. All the Numbers takes the 45(2) election instead, so no gain is taxed when renting starts and no capital cost allowance is claimed.[8] When renting stops after the years you give, All the Numbers takes the 45(3) election, so no gain is taxed when it returns to personal use.[9] A rented cottage can still take years of the principal residence exemption when your family lives there part of each year and the rent is incidental.

Short-term rentals

Renting for less than 90 days in a row is a short-term rental.[10] Where a province or town requires a licence or registration and the rental has none, no expense at all is deductible for those days, interest included.[11] Local rules vary too much for All the Numbers to check, so it asks whether yours is licensed where needed and warns you if not; it does not take the deductions away.[12]

Not modelled

  • GST/HST: a host whose rentals pass $30,000 over four quarters must register and charge it.[13] All the Numbers leaves it out; enter rent after any tax a platform collects.
  • Capital cost allowance on a cottage, and provincial accommodation taxes.

See also

  • Buying a cottage · A cottage is a second home for you and your family, kept alongside the home you live in. It can be bought with as little as 5% down if it is usable all year, or 10% if it is seasonal, but first-time buyer help, the Home Buyers' Plan and the FHSA cannot pay for it.
  • Renting out a suite · Rent from part of your home is taxable income. The costs of the whole home are deductible only for the rented share, mortgage principal and land transfer tax are not deductible, and a loss offsets other income when the rental is run to earn money. A lender may count part of the rent when you apply.
  • Selling or giving a cottage · Only one home per family can be the principal residence each year, so a family with a home and a cottage chooses which one takes which years. All the Numbers suggests the split that saves most and lets you change it. A cottage given to a child is taxed as if sold at its market value.

References

  1. ↑Our convention; T4036 reports rent for the year · A cottage's rent is weeks rented × the weekly rate, entered in today's dollars net of any GST/HST and platform fees, grown with the rent growth rate and spread evenly over the year's months unless it is rented in the summer only · effective 2026-10-12
  2. ↑Our convention: June to September, the usual cottage season; T4036 reports rent for the year, so the year's tax is the same · A cottage rented in the summer only takes its year of rent in equal parts over the months given here, and none in the others · See the source · effective 2026-11-02
  3. ↑Income Tax Act s.18 · Rental expenses are deductible only to the extent incurred to earn the rent; personal or living expenses never are — for a cottage used by both renters and the owner, the split is by time · effective 1972-01-01
  4. ↑Income Tax Act s.45 · Property regularly used partly to earn income and partly for another purpose is split in proportion to the use regularly made of it (a share of use: time, for a whole cottage) · effective 1972-01-01
  5. ↑Common practitioner reading of ITA 18(1)(a)/(h) and 45(1)(b); CRA gives no time rule · A rented cottage's shared costs and mortgage interest are deductible in the share weeks rented ÷ (weeks rented + weeks of personal use); weeks it stands empty count on neither side · effective 2026-10-12
  6. ↑Stewart v. Canada, 2002 SCC 46, [2002] 2 S.C.R. 645 · An activity with a personal element is a source of income only if carried on in a sufficiently commercial manner; reasonable expectation of profit is one factor (Stewart v. Canada) · effective 2002-05-23
  7. ↑Our convention under Stewart v. Canada, 2002 SCC 46 (¶52–54, ¶60) and ITA 18(1)(h)/248(1) · A cottage the family also uses has a personal element, so a year its rental loses money deducts nothing from other income (expenses capped at the rent) unless the household says it is run as a business at market rates · effective 2026-10-12
  8. ↑Our convention under ITA 45(1)(b)–(c), 45(2) (Folio S1-F3-C2 ¶2.51, ¶2.60.1) · A cottage rented from the day it is bought splits into a rented and a personal share from the start (45(1)(b)); one already owned that starts to rent, when not designated, takes the 45(2) election, so no gain is taxed at the change and no capital cost allowance is claimed · effective 2026-10-12
  9. ↑Our convention under ITA 45(1)(c)(i), 45(3) ("ceases in whole or in part to be used for that purpose") and 45(4) · When a taxed suite stops being rented, the owners take the 45(3) election (the planner claims no capital cost allowance, so 45(4) cannot void it): no gain is taxed when it stops, the rented share keeps its cost and years, and on a sale its gain is exempt only for the years it was lived in. None of the four years before the change is designated back · effective 2026-10-21
  10. ↑Income Tax Act s.67.7 · Short-term rental (ITA 67.7): a residential property (a cottage included) rented or offered for rent for less than this many consecutive days · 90 days · effective 2024-01-01
  11. ↑Income Tax Act s.67.7 · No deduction for the non-compliant amount of a short-term rental: all otherwise-deductible amounts (interest and CCA included) × days non-compliant ÷ days a short-term rental; non-compliant = not permitted where it is, or not registered or licensed where that is required; the rent stays taxable · effective 2024-01-01
  12. ↑Our convention; ITA 67.7 · The planner asks whether a rented cottage is licensed or registered where that is required and warns when it is not, but does not deny the expenses as ITA 67.7 would · effective 2026-10-12
  13. ↑Excise Tax Act s.148 · GST/HST small supplier: taxable supplies by the person and associates over the last four calendar quarters not above this amount; no registration or collection required · $30,000 · effective 1991-01-01