Written by; Suzanne Cody CPA, CGA
When you earn income from renting a property it can affect many things from a tax perspective. It is important that you are aware of these effects so that you are not surprised when it comes time to file your taxes.
The income from renting personal property can be considered either property income or business income depending on the kinds of and number of services you provide as related to the property. The number of properties you own does not change the way the government views the income but the more services that you provide the more likely that the income will be deemed to be business income. Currently the CRA is taking a long hard look at this type of income especially as it may relate to trailer parks.
Personal income from property (rental income) does not affect the calculation of Canada Pension Plan (CPP) premiums while business income is included in pensionable earnings.
Personal business income is included when calculating both the working tax benefit and medical expense supplements but rental income is not included when claiming these refundable tax credits.
If you are a corporation, rental income can be taxed at much higher rate than income from business. As of 2017, the tax rate for rental income was more than 20% greater than that for business income.