How to Make Money With Short-Term Rentals

A real profit can still be made from short-term rentals in Canada, but it’s not as simple as it was in 2019 when you could put one of your extra condos on Airbnb, set a nightly rate and then earn income with very little supervision. The calculations have changed because of municipal licensing requirements, the province’s principal residence rules and a modification to the Income Tax Act in 2024. If you make mistakes with compliance or the tax aspects, a property that appears to be profitable on a spreadsheet can end up losing money when the Canada Revenue Agency gets involved.

The guide examines the real factors that drive profit in the current environment by looking at which operating model suits your situation, what the city requires, how tax rules affect your bottom line, and how to price and manage the property once it is live.

Compliance Comes Before Profit, Not After

Begin with this point since it affects all the other decisions in this guide. Under section 67.7 of the Income Tax Act, which was introduced by Bill C-69, expenses associated with a non-compliant short-term rental have been able to be completely disallowed since 2024. If your rental fails to comply with local licensing, registration, or zoning requirements, the Canada Revenue Agency may disallow the deductions relating to the non-compliant days and will instead tax you on your gross revenue rather than your net income.

The actual impact is this: suppose your gross income from the rental is $50,000 and you have legitimate operating expenses amounting to $30,000 (such as mortgage interest, insurance, cleaning, and platform fees, etc.). In that case, if the rental is fully compliant, your taxable income will be $20,000. However, if it’s non-compliant for the entire year, the CRA will reject the deductions corresponding to those days, and you could end up paying tax on nearly the full $50,000 even though you still have to pay the $30,000 in actual cash expenses out of pocket. That’s what the difference is between a profitable side business and a property that loses money every month.

The disallowance amount is determined proportionally by comparing the number of days the property operated as a non-compliant short-term rental to the total number of days it operated as a short-term rental. A property licensed for eight months and unlicensed for four months loses the deduction only for those four months, not for the full year. There was once a grace period: if a rental became fully compliant by December 31, 2024, the CRA regarded it as compliant for the entire 2024 tax year. However, this relief will not apply in the future; from 2025 onwards, compliance will be assessed day by day.

The key point is to check your licensing status before making any decisions about your pricing strategy or your furniture budgets, since that is the only factor which makes all the other choices in this guide relevant.

Pick the Operating Model That Fits Your City

Not every model is legal throughout Canada, and that is the first consideration for profitability. Before comparing operating models within short-term rentals, it’s worth confirming short-term is the right call at all for your property, see our short-term vs. long-term rental guide for the income and effort trade-offs.

Direct ownership and full-time hosting.

You buy or already own the property and run it as a dedicated short-term rental. This generates the highest revenue per unit but requires the most capital and, in cities with principal residence rules, is often restricted to owner-occupied properties or specific zoned areas.

Primary residence hosting.

You rent out your own home, or a room or basement suite within it, while continuing to live there. This is the path of least regulatory resistance in most major Canadian markets right now, since principal residence rules were built around exactly this use case.

Rental arbitrage.

You lease a property long-term, then sublet it short-term on Airbnb or Vrbo, pocketing the spread. It requires no property purchase, but it also requires three approvals most operators skip: written landlord consent to sublet commercially, a municipality that doesn’t restrict STRs to owner-occupied units, and a lease structure that doesn’t violate provincial tenancy law. In cities with principal residence requirements, arbitrage on a secondary unit is often not viable, since the tenant subletting it can’t establish it as their own principal residence.

Mid-term rentals.

Furnished stays of 30 days or longer sidestep short-term rental regulation entirely in most jurisdictions, since they fall outside the definition municipalities and the province use to trigger licensing. You lose some of the nightly-rate premium a true short-term booking commands. Still, you also lose the Municipal Accommodation Tax, the GST/HST collection burden on most stays, and the compliance risk under ITA 67.7. For a secondary property in a city with strict principal residence rules, this is often the only legal way to operate it as a furnished rental.

Know the Rules Before You List Anything

The Canadian STR regulations are based on three layers, all of which are in effect at the same time.

The bylaws of your municipality establish specific licensing requirements, unit limits, and zoning restrictions. At the provincial level, a basic framework is set, and in the case of British Columbia this baseline is quite substantial: the Short-Term Rental Accommodations Act provides that short-term rentals may only be carried out in a property that is the host’s principal residence together with one secondary suite or accessory dwelling unit, a rule which has been in effect since May 1, 2024, in municipalities having a population of over 10,000 as well as in some smaller adjacent communities. A number of communities, such as West Kelowna and the tourism-zoned area of Kelowna, have chosen to exclude certain aspects of this rule, but throughout most of British Columbia’s urban areas the default position is strict. Before making a purchase, check the province’s page on the principal residence requirement for the particular municipality that you are considering.

Quebec has its own system and requires a tourist accommodation permit from the Corporation de l’industrie touristique du Québec, in addition to municipal zoning approval. Since neither Ontario nor Alberta has a single provincial STR law, the regulations are almost entirely determined at the municipal level, so the requirements in Calgary can be completely different from those in Toronto. Calgary is a good example of just how much these definitions can differ even within one country: the city classifies any stay of 180 days or less as a short-term rental for licensing, while the federal government uses 90 days for tax purposes. The two time limits operate independently, so a host in Calgary can be fully compliant with one but still have to meet the other.

On top of all of that comes federal tax compliance under ITA 67.7. The statute specifies that a short-term rental is residential property let out for periods of less than 90 consecutive days, and that failure to comply with either municipal or provincial law leads to denial of the expense. The 90-day figure is a definitional limit, not an annual cap, so it is important to be clear about this distinction (some other cities have a regulation relating to short-term rentals that involves a limit of 90 nights per year, but this is a completely different matter and generally does not apply in Canada; further details on this are given in the FAQ below). Furthermore, do not confuse the 90-day income tax threshold with the separate 30-day threshold that determines your GST/HST obligations, which will be covered next.

The Tax Rules That Decide Whether You Keep the Profit

In Canada, two tax systems apply to income from STRs, and when people mix them up, many hosts run into trouble.

Income tax.

Rental income is either passive or active business income, depending on the services you provide. Basic accommodation with standard utilities and self-check-in is generally passive income. Add daily housekeeping, prepared meals, or concierge-style services, and the CRA is more likely to treat it as active business income, which brings mandatory CPP contributions but also a wider range of deductible expenses.

GST/HST.

For GST/HST purposes, a short-term accommodation is a stay of less than one month, not 90 days. That’s a taxable supply, similar to a hotel room. Once your worldwide taxable revenue crosses $30,000 over any four consecutive calendar quarters, you must register for a GST/HST account and start collecting and remitting on every stay under a month, including direct bookings that don’t go through a platform. Airbnb and Vrbo generally handle GST/HST collection on platform-facilitated bookings automatically, but direct bookings from your own website or repeat guests are your responsibility. If you forget to add it, the CRA still expects you to remit it out of whatever you charged.

A shift in the use of a property from short-term to long-term or vice versa also constitutes a change-in-use event under the Excise Tax Act, as it involves going from a taxable supply to an exempt one or back again. The amount due is based on the property’s basic tax content rather than automatically on its full market value, and the precise details depend on how the property was previously used and how it was financed. This kind of calculation should not be carried out by yourself; instead, you should obtain a proper quote from an accountant who has experience in dealing with short-term rentals before you change the use of a property, since the figures involved can be so large as to affect whether or not the move is worthwhile.

Capital Cost Allowance.

You can claim depreciation on the building at 4% annually under the standard CCA class for residential buildings, and it will lower your taxable income now. It will also create a recapture liability later. If you sell the property for more than its depreciated value, the CCA you claimed gets added back to your income and taxed at your full marginal rate rather than the lower capital gains rate. In a market where the property has appreciated, that recapture bill can be substantial. If you’re converting your own home into a full-time STR and want to preserve the principal residence exemption on a future sale, claiming CCA on it will disqualify you from the election that lets you defer that tax event. Talk to an accountant before you claim it, not after you’ve filed.

Insurance Is a Deduction, Not an Afterthought

A typical homeowner or landlord’s policy will exclude coverage for commercial short-term rental activities, so any claim resulting from a guest’s injury or substantial damage can be rejected if you’re running such a rental without the appropriate coverage. In most Canadian municipalities that require short-term rental licences, a minimum threshold for commercial general liability of around $2,000,000 is set, and you are expected to have a policy that explicitly includes short-term rental use. Protection schemes provided by the platform, such as Airbnb’s host guarantee, are generally not regarded by municipalities as a valid replacement for your own commercial insurance policy. Since prices differ according to the provider, the type of property and the level of coverage, you should obtain a direct quote from an insurance broker who specializes in short-term rental coverage rather than assuming that your current landlord’s policy already provides this coverage.

Pricing and Revenue Management

Once a property is licensed and insured, its revenue depends on both occupancy and the rate charged. Generally, dynamic pricing tools—which adjust the nightly rate based on local demand, daily patterns, and seasonal trends—perform better than a fixed nightly rate, particularly in areas with real seasonal fluctuations such as ski towns or lake resorts. Charging the same price in February as in July means you lose money in one season while the property sits unoccupied in the other.

All direct bookings, guests who visit more than once, and a quick response to inquiries all help to improve your occupancy rate, but they don’t change the basic principles: a property that is well situated and well furnished in a market where there is genuine demand from visitors will always beat the pricing strategy used in the case of a poor location.

Getting Started

Work through these in order, because each one depends on the answer to the one before it.

Check the municipal and provincial regulations for the specific address, not the city as a whole, since bylaws can differ from zone to zone and may vary from block to block.
Choose the type of operating model you will use—whether it’s owning your primary residence, holding direct ownership, or engaging in mid-term rental—on the basis of what is actually permitted there.
Make sure you have the municipal licence or registration number before listing the property anywhere.
Establish a specific commercial STR insurance policy with sufficient liability coverage.
Once you reach the $30,000 threshold, sign up for GST/HST and set up a system for collecting it on direct bookings.
Before you file your taxes, go and ask an accountant about the CCA and the principal residence exemption, rather than doing so during tax season when you’re under pressure.
Start with dynamic pricing from the first day, rather than using a fixed rate you will have to adjust later.

If you prefer to entrust the licensing research, pricing, and ordinary management to a company that has already handled these matters in various parts of Canada, Nomadics will provide you with a consultation call in which they show you what a compliant and profitable arrangement would look like for your particular property.

Frequently Asked Questions

Can you really make money off Airbnb in Canada?

Certainly; however, the margin is more determined by compliance and expense management than by the nightly rate you set. A licensed property, in a good location and in a market with consistent visitor demand, can greatly exceed the performance of a long-term rental. On the other hand, an unlicensed property can still end up at a loss even if it has a high occupancy rate, because non-compliant expenses can be disallowed under ITA Section 67.7, and thus you will be taxed on revenue that you never actually kept.

Is Airbnb still profitable in 2026?

In places where it is still permitted to operate, yes. Profitability has shifted toward well-managed, compliant properties and away from the low-effort arbitrage model that worked a few years ago. In cities that have introduced strict rules regarding principal residence, the number of people who can operate has been reduced, lowering supply and, in certain markets, causing nightly rates to rise for hosts who are still in compliance.

What is the 90-day rule for Airbnb?

In Canada, the 90-day rule generally means the one set out in federal tax law and, in the case of British Columbia, the one found in provincial legislation; if a property is let for a period of less than 90 consecutive days, it is considered a short-term rental and is therefore subject to STR licensing and tax regulations. When a stay reaches 90 days or more, however, it is treated as a long-term tenancy and is covered by residential tenancy laws. This contrasts with the “90 days a year” limit applied in places such as London or San Francisco, which caps the number of nights per year that a whole home can be booked. Most Canadian cities do not have an annual cap of this kind; Calgary is a notable exception when it comes to the definition, since it regards any rental for a period of under 180 days as a short-term rental, meaning that a host in Calgary has to follow two different day-count thresholds depending on whether the CRA or the city is asking.

How risky is starting an Airbnb?

The financial risk is real but manageable if you sequence the decisions correctly. The biggest risks aren’t market risk; they’re compliance risk (losing your deductions or getting fined for operating unlicensed), insurance risk (a claim denied because your policy doesn’t cover commercial short-term use), and cash flow risk (underestimating cleaning, platform fees, and off-season vacancy). None of these are unpredictable. They’re avoidable with licensing sorted first, a proper STR insurance policy in place, and a realistic expense model before you buy or list.

Do I need a business licence to rent short-term in Canada?

In most municipalities that regulate short-term rentals, yes. Requirements vary by city and sometimes by zone within the same city, so check your specific municipal bylaw rather than assuming a neighbouring city’s rules apply to you.

Is rental arbitrage legal in Canada?

It depends entirely on the municipality and the terms of your lease. In cities with principal residence requirements, arbitrage on a secondary unit is often not legally viable. Where it is permitted, you still need written landlord consent to sublet for commercial purposes.

Sources

Compliance Comes Before Profit, Not After

Pick the Operating Model That Fits Your City

Know the Rules Before You List Anything