Are you considering renting out your laneway home to help pay your mortgage? You’re not alone; rental income makes paying an expensive mortgage much more doable for many families. If renting out your laneway house sounds like an ideal solution it’s time to think about the tax implications of renting out Laneway homes in Vancouver, B.C.
Forget about tapping into the short-term rental market
Unfortunately, you probably can’t rent out your laneway house as an overnight rental property. The City of Vancouver only allows homeowners to place a principal residence into the short-term rental market. The goal behind the ban is to encourage laneway house owners to find a long-term renter to help alleviate the severe rental shortage throughout Vancouver. Violators face a hefty $1,000 per ticket fines.
Long-term rental taxes to consider
Before you begin interviewing prospective tenants, it’s crucial that you investigate how taking on a long-term tenant might impact your tax situation. Laneway homes in Vancouver, B.C. play an essential role in helping to fulfill the demand for rental housing in the area but, as the homeowner, there are significant tax obligations to keep in mind.
Some taxes that you’ll need to pay include
- Rental income tax
- Capital gains tax when you sell
Get ready to pay capital gains tax when you sell
Canadian homeowners traditionally don’t pay any capital gains taxes on the sale of a primary residence. However, you’ll most likely owe taxes on your profit from the sale of your home if it includes a laneway home that’s been serving as a rental unit. The amount of taxes that you’ll owe depends on the value of both the laneway house and the land where the structure is situated.
Lastly, laneway homes in Vancouver, B.C. represent a terrific opportunity for homeowners to generate rental income. Before you decide to become a landlord, it’s a sensible idea to meet with your tax advisor to discuss all of the financial implications involved in renting out your laneway home.
Silvercrest Custom Homes and Renovations specializes in designing spaces to enhance your lifestyle. Contact us to learn how you can have a laneway house that suits your property and pocketbook.