Thanks to the advent of ride-sharing and home-sharing platforms such as Airbnb, Uber and Lyft, the way many Canadians earn their income has rapidly evolved. With so many new income streams for Canadians, when it comes to your taxes, do the same rules apply?
Our tax experts take on the big questions:
How has the “sharing economy” changed the way we report our income and pay tax?
No longer is it mandatory for the exchange of goods and services, and the paperwork that comes with it, to happen in person. For instance, if you’re an Uber or Lyft driver, Etsy seller, or Airbnb host, you know that every aspect of the seller-customer transaction is automated and facilitated by the company. This new way of doing business has completely changed the transaction and relationship between merchants and customers.
When it comes to reporting your income using your CRA certified software, however, nothing has changed. Whether you’re a part-time earner or derive the bulk of your income from these new “sharing” platforms, the income is taxable and must be reported.
I’m an Uber or Lyft driver. What are the rules when it comes to filing with the CRA?
The answer to every tax question is: it depends! Uber and Lyft drivers are generally considered contractors, which means self-employed. However, based on court rulings from other countries, some Uber/Lyft drivers might be considered employees by the CRA. Some factors include:
– Control: Does Uber control how the driver gets paid, what they get paid, and decide what the driver will do?
– Opportunity for profit or loss: Are drivers paid on a piece-rate or commission basis, or can they negotiate the amount they receive in exchange for their services?
– Tools: Who provides the tools used by the driver to provide the service, such as car and smartphone?
– Income source: Is Uber the only source of income for the driver or does the driver have additional sources?
Can I claim my expenses if I’m an Uber or Lyft driver? What are some examples?
If you are considered self-employed, expenses such as fuel, maintenance, insurance, depreciation (if applicable), and lease payments (if applicable) are deductible. However, these expenses will be prorated (divided proportionately) based on how much your vehicle was used for your ride-sharing business. If you’re doing your own taxes, your 2017 tax software will guide you through these calculations, but the detailed log book you have hopefully been using year-round to track business mileage will be a helpful tool when it is time to file.
Does renting out my house on Airbnb make me a landlord?
Not necessarily! It all depends on what services you provide the short-term tenant. As you get ready to file, ask yourself these basic questions:
– Do you provide laundry service?
– Do you provide meals?
– Do you change the bedding during your guests’ stay?
If the answer is “yes” to these questions, you are considered a hospitality business, not a landlord. If you only provide keys and access to the property and nothing else, you are considered a landlord.
How should I report my Airbnb income?
Once you’ve used the questions above to determine the nature of your particular situation, you’ll be able to declare the income as rental or business income using your CRA tax return software.
Can I claim all of my house expenses on my taxes? What are some things I can claim?
If your Airbnb arrangement is considered a rental, housing expenses can be claimed, but prorated based on how much your property is used as a home-sharing rental (are you renting out one bedroom or a whole house?). These expenses can be prorated again based on the time period that the property was rented (just on weekends or all the time?).
In other words, if the nature of your Airbnb is a rental, all housing expenses, such as utilities, mortgage interest, property taxes, maintenance, repairs, and depreciation, are allowable expenses. However, you have to exclude your personal space, and personal time that you use the property from those expenses. To guide you through these tricky calculations, keep a record of Airbnb-related receipts and records in a rental journal.
Should PayPal income, and other online income, be reported to the CRA?
PayPal is a method to receive payments for transactions. In the eyes of the CRA, this is no different than a pay cheque or bank transfer. If you are using PayPal to receive income for recurring transactions for the sale of goods and services – such as your Airbnb income or another online store or business – then you are considered to have a business by the CRA. This means you must report it on your taxes using CRA approved software. You can’t hide this income either – based on a landmark court case in 2017, the CRA can now request from PayPal all records of transactions in Canada.