T776 or T2125 for Airbnb in Canada: Rental or Business Income

Do I report my Airbnb on T776 or T2125?

In most cases, report short-term rental income on Form T776 as rental income when you rent out space and provide only basic services. If you also provide additional services, such as cleaning, security or meals, you may be carrying on a business, and the income goes on Form T2125. The CRA sets no cut-off: the more services you provide, the greater the chance the rental is a business (CRA: rental or business income; CRA: sharing economy). The income is taxable on either form.

On either form, the net income after allowed expenses is added to your other income. The form still changes more than the line numbers. Net business income can bring self-employed CPP contributions, where you pay both the employer and employee portions (CRA: starting to work). The CPP Act leaves out a business whose gross revenue is more than 50% rent from land or buildings (Canada Pension Plan, paragraph 14(a)(i)); whether guest charges that include cleaning or meals count as rent is a point to settle with your preparer. Quebec residents contribute to the QPP instead (Canada Pension Plan, subsection 13(4)). The filing date is June 15 when you or your spouse or common-law partner are self-employed, though any balance owing is still due April 30 (CRA: due dates). For the full self-employed picture, see how self-employed income is taxed.

The case is not simple if:

• You clean after stays, leave food, or offer any service beyond the space itself.
• A province or municipality requires a registration, licence or permit and you did not hold it for every day you rented or listed the space. The CRA can reassess any year for that rule, whatever the usual time limit.
• You rent short stays for part of the year and longer stays for the rest.
• You filed T776 in earlier years and have since added services, or always offered them.

Gather before you choose a form: nights booked in the year and how many stays were under 90 consecutive days, the services you gave on each stay, proof of every registration, licence or permit with its dates, the platform's annual summary and payout reports, your expense records, who is on title and the mortgage, and statements from any co-host or property manager.

What are basic services and what are extra services?

Basic services come with the space: heat, light, parking and laundry facilities. Additional services are things you do for the guest, such as cleaning, security and meals (CRA: rental or business income; Form T776).

The CRA does not say how many additional services tip a rental into a business, or whether cleaning between guests counts the same as cleaning during a stay. The question turns on your facts. The archived CRA bulletin that Form T776 points to, IT-434R, also names maid service, a constant supply of fresh linens, and meals and drinks as services that may point to a business. It says the size of the operation and the time you spend managing it are not what decides the question.

Where does the income go on the return for each form?

Rental income goes on T776 and then to lines 12599 and 12600 of the personal return. Business income goes on T2125 and then to lines 13499 and 13500 (Form T776; Form T2125).

T776 also asks for the gross rents from short-term rentals on line 8140, apart from all rents on line 8141. For which T776 line each cost goes on, see rental statement expense lines.

Does a licence, permit or registration affect what I can deduct?

Yes. For tax years after 2023, if a short-term rental is not compliant with provincial or municipal rules, the Income Tax Act denies the share of your expenses that matches the non-compliant days. The rent is still taxable (Income Tax Act, section 67.7).

• A short-term rental is a residential property, or any part of one, rented or offered for rent for less than 90 consecutive days.
• It is non-compliant on any day when the province or municipality does not permit it at that location, or requires a registration, licence or permit and you do not meet every requirement.
• The denied amount is the expenses that would otherwise be deductible, multiplied by the non-compliant days, divided by all the days the property was a short-term rental.

The formula applies only to the short-term share of each cost. Before you use it, set aside the part that relates to long-term tenants or your own use: the Act's expense total covers amounts deductible "in respect of the use of a residential property as a short-term rental", and Guide T4036 excludes a long-term unit from its chart (Guide T4036). If you rent short stays part of the year and longer ones the rest, keep a day-by-day log of each booking's length so the short-term days can be counted. How to count a stay that runs past 90 days is a point to confirm with your preparer.

The denial reaches capital cost allowance (CCA, the tax write-off for the building and furnishings) too, and Form T776 has a chart for each (Form T776). The statute's wording is not limited to rental income: it covers any amount deductible in computing income in respect of a short-term rental. The T2125 has no matching line, so how the denial is entered when the income is business income is a point to settle with your preparer. The Act also lets the CRA reassess any year to give effect to the rule, despite the usual time limits.

The rule turns on local law, which differs by place. In British Columbia, for example, the province says short-term rentals are limited to principal residences in many communities and that hosts must register (Government of British Columbia). Check your own province and municipality.

Keep records showing that the property was in a place that permits short-term rentals and that you met every registration, licence and permit requirement (CRA: short-term rental deductions). For the 2024 taxation year only, a rental in a place that required registration, a licence or a permit counted as compliant for that whole year if it met every requirement by December 31 (Income Tax Act, section 67.7).

Which form do I use if I only rent a room in my own home for short stays?

The same services test applies. A room rented on short stays with only basic services goes on T776, and you claim only the expenses that relate to the rented part of the home (CRA: sharing economy).

The CRA suggests a reasonable method, such as the rented area's share of the home's floor area, multiplied by the share of the year the space was rented. Keep the measurements and the dates. The licence rule covers "all or any part of" a residential property, so a rented room is a short-term rental when stays are under 90 consecutive days (Income Tax Act, section 67.7). If you serve breakfast or clean the room for guests, the services test is back in play. For the split of a shared home and the effect on a later sale, see rental income and turning a home into a rental.

Does it change if I use a co-host, a cleaner or a management company?

Possibly. The CRA's test counts the services you provide to your guests, and its current pages do not say how a co-host, cleaner or management company fits in (CRA: sharing economy).

The archived bulletin says that handing the management to an agent does not by itself change the nature of the income: if the renting is a business when you run it, it is still a business when an agent runs it for you (IT-434R). It does not cover a hired cleaner. The CRA has not said whether cleaning you arrange counts as a service you provide to guests; the test looks at what the guest receives from your rental, so it may still count, and that is a point to settle on your facts. Fees you pay a co-host, cleaner or manager may be deductible; see rental statement expense lines. A co-host paid a share of the income instead of a fee may be a co-owner or a partner; see co-owned rental property reporting.

Does Airbnb or the platform report my income to the CRA?

If you rent through a reporting platform and are not an excluded seller, it reports to the CRA each year, and renting real property is one of the covered activities (CRA: reporting rules for digital platform operators).

The report includes the total paid or credited to you by calendar quarter, the platform's fees, commissions or taxes, each listing's address and, where available, the days each listing was rented (CRA: what information is shared). The days let the CRA set your rental days against local licence rules. The report does not choose between T776 and T2125. Compare its totals and days with your own records before you file. Who is reportable, when you get your copy and what to fix first are in CRA digital platform reporting.

Do I charge GST/HST on short stays, and does the form choice change that?

GST/HST is a separate tax with its own test. A stay of less than one month is taxable when it costs more than $20 a day; a stay of a month or more is generally exempt rent, though hotel-type premises can stay taxable (Excise Tax Act, Schedule V, Part I, section 6; CRA: sharing economy). The licence rule above reaches stays under 90 consecutive days, so a 45-day stay is inside it but generally outside GST/HST. Count your total taxable sales (stays plus any other business of yours and your associates') against $30,000. If one calendar quarter passes it, registration is effective no later than the day of the supply that made you exceed the limit; if only the last four quarters together pass it, you stop being a small supplier at the end of the month following the quarter in which you exceed the limit (CRA: when to register). The CRA states the test by the length of the stay and the amount you sell; neither CRA page ties it to T776 or T2125.

A booking platform may also have to charge and collect the tax on stays by hosts who are not registered (CRA: platform-based accommodation). Registration, the platform's role and what happens on a sale are in GST/HST on Airbnb rentals.

Can I switch between forms from one year to the next?

Yes, in the sense that the form follows your services each year; the CRA's pages describe no election to choose one. If you add cleaning or meals, or stop them, the form may change with them. Nothing in the CRA's guidance on this test says how a change affects capital cost allowance already claimed or earlier years, so treat a switch as a point to review, not a free choice.

The larger risk is a year already filed. A host who filed T776 while giving extra services, or the reverse, may have filed on the wrong form. The income was still reported, so the gap may be CPP on net business income (unless the rent exclusion above applies) and, if the host should have registered, GST/HST. Compare each past year's services with the test, and ask whether any year needs an adjustment. If income or GST/HST was left out, see unreported income and voluntary disclosure.

Example

These examples are illustrative; all figures are in Canadian dollars.

Laneway house with basic services only

A homeowner in Vancouver rents a laneway house to guests for C$30,000 a year. The rent covers heat, light and laundry, and nothing else: no cleaning between stays and no meals. Basic services point to rental income. The host reports it on T776, which carries to lines 12599 and 12600, and first checks the city and province's registration rules before deducting expenses.

Whole home with cleaning and breakfast

A host in Halifax rents a whole home for C$60,000 a year, cleans after each stay and leaves breakfast. Cleaning and meals are the CRA's own examples of additional services, so the income may be business income on T2125, with the gross on line 13499 and the net on line 13500. The CRA looks at the number and type of services and gives no bright line. The host's mix of services decides, and business income may bring CPP contributions.

Missing registration on part of the year

In a year after 2024, a host's short-term rental needs a registration that the host did not hold for the first 120 days. The property is offered as a short-term rental on 240 days, and expenses that would otherwise be deductible total C$40,000. The denied amount is C$40,000 × 120 ÷ 240 = C$20,000. The other C$20,000 stays deductible, and all of the rent is still reported.

Different for you?

• You offer cleaning, meals or other services: the income may be on T2125, which can change CPP and the filing date. Have the services checked against the CRA's test with individual tax help.
• Your area requires a registration, licence or permit, or you rented on days you were not covered: the denied share depends on exact days, and the CRA can reassess. See rental losses and CRA review and get individual tax help.
• You filed T776 for years and are unsure it was right, or platform income does not match your returns: past years may need an adjustment, sometimes for CPP or GST/HST. If income or GST/HST was left out, see unreported income and voluntary disclosure. See also CRA digital platform reporting and individual tax help.
• Your payout reports, nights booked and expenses are scattered, mixed with personal costs, or do not match the platform totals: the form and the denied share both depend on them. See catching up on overdue books and get bookkeeping help.
• You charge guests GST/HST or think you should register: see GST/HST on Airbnb rentals and when to register for GST/HST.
• You co-own the property or share it with a spouse: see co-owned rental property reporting.
• You want to claim capital cost allowance, or need the T776 line for each cost: see should you claim CCA on a rental and rental statement expense lines.
• Your payouts arrive in US dollars: see US-dollar sales and marketplace payouts.
• A corporation owns the property: see holding and investment corporations.
• You live in Quebec: the federal rules on this page apply to your federal return. Revenu Québec has its own return and rules, which this page does not cover.
• You live outside Canada, or became a non-resident during the year: this page assumes a Canadian resident; see non-resident landlords.
• You are also a US citizen or resident: the US return has its own Airbnb split; see Airbnb Schedule C or Schedule E.