Ride and accommodation sharing: The tax impact.
January 29, 2020
Sharing is caring, and millions of Canadians agree.
That’s why it’s no surprise that many Canadians participate in the sharing economy through peer-to-peer ride services, such as Uber and Lyft, or private accommodation services, such as Airbnb. That doesn’t even include other sharing services such as making and selling goods, peer-to-peer RV share and workspace rentals or freelance professional services.
With the ever-growing number of people looking to conduct business through online services, the sharing economy continues to evolve and expand its options to consumers.
But what does the taxman have to say about this?
Rule #1: If you are earning money from the sharing economy, you must report your income on a T2125 Statement of Business or Professional Activities. Don’t pout yet because you can also look to claim eligible business expenses. For example, some potential claims for a ridesharing driver are:
- Maintenance expenses, such as gas, oil, windshield washer fluid, new tires or tune-ups
- Vehicle insurance
- Tolls or parking costs
- Cell phone expenses
Rule #2: Once you begin earning over $30,000, you will need to register for a GST/HST account and start collecting GST/HST for the Canada Revenue Agency (CRA). This rule doesn’t apply for ridesharing drivers, because they are required to remit sales tax as soon as any income is earned.
Let’s look at the two prominent sharing economy initiatives in more details: ride sharing and accommodation sharing.
As of July 1, 2017, all fares charged by rideshare partners are now subject to GST/HST, regardless of how much income you earn from ridesharing. Unless you’re located in Quebec, where Uber collects and remits drivers’ sales tax, the driver is responsible for this process. We encourage ridesharing drivers to consult the CRA’s GST/HST and Commercial Ride-sharing Services info sheet or speak with an H&R Block tax expert for support to ensure your GST/HST return is filed correctly, and on time.
Whether you’re renting your primary or secondary residence, offering a short-term rental has tax implications too. Any money received through accommodation sharing is considered taxable and should be reported as rental income on your tax return by filing Form T776, Statement of Real Estate Rentals with the CRA.
See Rule #2 above for GST/HST implications.
Don’t forget about those deductions! Deductible items may include rent, mortgage, cleaning fees, rental commissions, insurance and other expenses, however we encourage you to consult with a local tax expert to evaluate your rental options.
Rule #3: No matter how you are participating in the sharing economy, keeping your receipts and tracking your expenses will make the taxman (and you!) very happy.
Read our other blog posting for further information: