Renting out part of your home
The tax on the income
Rent is income. Expenses attributable to the rented portion — interest, property tax, insurance, utilities, maintenance — are deductible against it, and the tax lands at your own marginal rate, on top of your salary.
The tax at the sale
This is the part people miss. CRA folio S1-F3-C2 keeps the full principal-residence exemption only while all three hold:
- the rental use stays ancillary to living there,
- there is no structural change creating a self-contained unit, and
- no capital cost allowance is claimed.
A self-contained suite is the folio's own example of a structural change (¶2.58). If one exists, the full exemption is gone and the tax at sale is real.
What the engine does
- Taxes suite income annually, on the year rather than the month, as the CRA assesses it.
- Never claims CCA, deliberately: claiming it would jeopardise the exemption.
- Lets you assert the full exemption still applies, and then warns loudly about the three conditions rather than quietly agreeing.
- With rental-loss offset switched off, banks a loss year and applies it against later suite income. That is a deliberate middle ground and not a CRA mechanism — a denied loss is simply lost, and an allowed one offsets other income the same year. Switch the offset on to model the allowed case.
- Flags a vacancy rate above 20% or a rent that is outside 0.2%–0.6% of price per month, so an input typo does not quietly drive the answer.
Research: docs/research/cra-rental-income.md, docs/research/capital-gains-pre-selling.md.