Once you start renting out that mortgage helper you will need to include rental income on your tax return, using form T776 Statement of Real Estate Rentals.
You must keep accurate records of your rental income and expenses each year and retain them for six years. These records help you figure out your net profit for the year. The tax you pay will depend on the net income from the rental; any losses will be deducted from your other income and if you have no other income will be carried forward to the next year. Whether a long-term or short-term rental, most rental receipts are considered income for tax purposes.
If your mortgage helper is for a parent, grandparent, or sibling, they are considered a ‘related person’. You may still have to report the income as rental income, however, if you’re renting below fair market value, you won’t be able to write-off any losses, and will have to report the income differently.
Airbnb is a big thing now, and you need to realize if you’re doing this regularly, then you need to claim it as rental income. You get the same expenses as if it was a long-term rental, plus you can write off bedding, towels, and soap etc. that you use exclusively for this rental. If you supply meals, then the income may be considered business income and not rental income.
Your mortgage helper can definitely help pay for the mortgage and make your dream home more affordable. With experience, managing the rental side does get easier. Finding a good property manager, lawyer and tax preparer can help you manage the details.
For more information about renting visit https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036/rental-income-2016.html
What Can I Deduct as a Business Expense?
Is Now a Good Time to Review Your Tax Situation?
Surviving A Compliance Review With Canada Revenue Agency
Have You Not Filed Your Tax Return Yet?
How do you calculate your installment payments?
Do You Have to Make Income Tax Installments?
Getting Your Tax Records Ready for Your Accountant
The Challenges and Joys of Working for Yourself – Tax Tips for Freelancers