What is Toronto’s vacant home tax, and how does it affect Airbnb owners?

What is a vacant home tax in Toronto? 

A vacant home tax (VHT) in Toronto is a 1% charge on unoccupied homes for more than six months of the previous year. This policy aims to increase housing availability in the city by encouraging property owners to keep their homes occupied or sell them to people who will.

What quantifies as a vacant home? 

If a house or apartment has been empty for more than six months in the past year, it’s considered vacant. The property must not meet any of the exemption criteria, which include:

  • The property is the owner’s principal residence, or a permitted occupant or a tenant occupies it.
  • The property is undergoing repairs or renovations.
  • The owner is in the care of a person, court order, or vacant new inventory.
  • The property is occupied for full-time employment.

And if you haven’t heard it, in Toronto’s vacant home tax, Airbnb is also affected.

How does Toronto’s vacant home tax Airbnb affect its owners?

The Toronto vacant home tax Airbnb can affect owners in some ways:

  1. Financial incentive: A 1% tax on a vacant property’s Current Value Assessment (CVA) can be significant, potentially amounting to $500 or more annually. This tax discourages property owners from keeping their properties vacant. It encourages them to rent or sell their properties, which can impact the availability of short-term rental options like Airbnb.
  1. Regulation: Some cities in Canada, such as Hamilton, have introduced vacant home taxes and bylaws to regulate short-term rentals like Airbnb. These regulations can limit the number of properties available for short-term rentals, which may affect the profitability of Airbnb owners.
  1. Potential exemptions: Property owners may be eligible for exemptions from the VHT if their properties meet specific criteria, such as being the owner’s principal residence or a permitted occupant or if the property is undergoing repairs or renovations. However, these exemptions may come with additional documentation requirements and scrutiny from local authorities.
  1. Increased scrutiny: Airbnb and other short-term rental platforms may face increased scrutiny from local authorities, as they may be required to provide information on property owners and their rental activities. This could lead to more frequent audits and increased compliance costs for property owners.

Airbnb owners must stay updated about the Toronto vacant home tax Airbnb in their specific city, understand the exemptions, and evaluate their rental strategies to optimize their business under the new regulations.

How is Toronto’s vacant home tax Airbnb calculated? 

The tax rate applied depends on the year the property is considered vacant:

  • 2022 & 2023: 1% of the property’s Current Value Assessment (CVA). You can find your CVA on your property tax bill.
  • 2024 & onwards: 3% of the CVA of the property.

Toronto vacant home tax Airbnb calculation example : 

7-month Airbnb vacancy

Property’s CVA: $1,200,000

Vacant for 7 months in 2024 (not owner’s principal residence)

Tax rate (2024): 3%

Excess vacancy months: 7 months – 6 months = 1 month

VHT = CVA * Tax rate * Excess vacancy months

VHT = $1,200,000 * 3% * 1 month

VHT = $36,000

So, the property owner would owe $36,000 in Toronto vacant home tax Airbnb. 

What can Airbnb owners do? 

There are several options available for Airbnb owners to survive and strive with the new regulation: 

  • Rent out the property: Rent out for at least six months of the year. It can be done through long-term rentals or using Airbnb for short-term rentals for less than six months.
  • Claim exemptions: Property owners can claim exemptions from the Toronto vacant home tax Airbnb if their property meets certain criteria. Each type of exemption requires specific documentation to be submitted by the owner claiming the exemption.
  • Consider tax deductions: Airbnb hosts may be eligible for tax deductions for expenses related to their rental activities. Hosts should keep accurate records of their expenses and consult with a tax professional to determine their eligibility for deductions.
  • Stay informed: Airbnb owners and hosts should stay informed about changes to local regulations and tax laws that may affect their rental activities. 

Conclusion

Stay alert about Toronto’s vacant home tax Airbnb, adapt business strategies, and consider engaging with relevant communities and policymakers to navigate the changing landscape. 

Things may look a bit sour from here, but let’s hope for future adjustments based on policy reviews and public feedback. 

If you have questions, dial 311 or contact your city councillor.