Rules on Tax Deductions on Primary Residence which itself is a Rental

[Kitty49]

Hi All,

I had the following question If host rents out a room in their home which itself is a rental 

1. Can the host deduct their propotional house Rent for the airbnb room ?

2. How should be the proportional tax deduction  calculated - By Area or Rought esimtate  = Airbnnb Room  / Total Rooms in the home ?

3. Are the deductions for  the Number of Days Avalable to Rent Or Number of Days Actually Rented ?

4. What other deductions / expenses can be taken out  ?

[Corliss2 · Accepted solution]

Hello, Kitty,

I hope that you are well!

Yes, you can deduct a portion of your monthly rent as an expense. Calculate the square footage of the rented bedroom as a percentage of your home's overall square footage. If this room is designated as "exclusive use" for your ABB business, you do not have to pro rate this amount . Additonally, you can claim a portion of your kitchen; also, your entry way to your home and laundry room and any other space that is used partially for business purposes. If the bedrooms are used solely for business and not for personal use in the non-booked days, you can claim the full % of the bedroom area and not deduct from that percentage of days not used. 

As far as actual expenses go you actually have 2 separate expense entries- 

- Household expenditures deduction. This includes everything that you buy for your home that is used for both your use and for business use. Also, claim the allowable portion of all of your utility bills, insurance, banking fees,  etc. Use the % that you calculated for the area of your rented out room.

-Direct Expenses 100%. Purchases used solely for business purposes. This includes bedding, towels, cleaning supplies, laundry soap, toilet paper, coffee/tea/cream/sugar, advertising, postage, etc.

Also, if you have to replace an item that is broken inadvertently.

Your cell phone is also a 100% deduction.

Essentailly, for CRA purposes, you are conducting a business in your home.

For more information, the CRA website has detailed informaton  and the necessary forms related to business use of home expenses.

This is a longer response than I had anticipated. I am a bit of an income tax nerd. Keep all of your receipts for EVERY purchase. Write on the receipt what it is for and what category it goes into.

Hope this is helpful!

[Kitty49]

Hello Corliss ,

This is exteremly comprehensive and super helpful . I have one other question on this : 

- Since all the sources on CRA website around "Rental expenses" talk about Renting out an Owned properties and not Renting Out a  Rental House/Room ; and they ONLY consider "Tax" and "Interest" part of your Mortgage payment (Not the principal payment) as an eligible expense . Do you think it is safe to consider the Whole Rent I pay (proptional by square feet ofoucrse for that room) as an eligible expense or should I calculate an esitamated "tax" and "interest" portion of it . 

For eg: If my primary home is 1000sq/ft and I pay $1000 in rent ; and Airbnb use area within my house is 250sqft so propotional rent would be $250. Now the question is if I can consider the whole $250 or should I further calculate a rough % of tax and interest on that $250 .

I dont know if this even a valid scenario as I could not find much on this . If this is not the case and I am overthinking , then as what expense category would this Monthly Rent fall under ?

I really appreciate your help and efforts in taking time to respond to my question

[Yi24]

Hi Kitty,

could you tell how to fill the T776 form for those expenses such as bedding, towels, cleaning supplies used for airbnb?

Thanks,

Yi