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Email this7:46 pm
April 15, 2021
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Hi
My mom owns and lives in a 3 bedroom house in Toronto. I don't own any property. I occupy one room.
With my mom's consent, can I rent my room to a friend of mine? I will claim the rent as income and I will pay tax on that. I also have a part time job. Is it legal for me to accept rent?
9:56 pm
October 21, 2013
Online
Sounds like you are trying to redirect income from your mom to you because you are in a lower tax bracket.
If you are renting your room from your mom and she is currently declaring that as income, then I think you could sublet your room to someone else, but you would need to continue paying your mom rent and she would have to declare it. I think your mom would have to approve the tenant because it involves shared common space.
Alternatively, your mom could decide to give you a part ownership in the house by changing the title. i think you could then rent out your room directly. But she probably doesn't want to do that.
Tax evasion is not generally acceptable.
I am not a lawyer and this is not legal advice.
2:55 am
September 11, 2013
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Your question was about legality. If the terms between your Mom & you allow you to sublet then I don't see a problem. Amateur opinion.
8:56 am
September 24, 2019
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I would imagine if you were paying rent before on the room and your mother was paying income tax on that, she probably would have deducted a certain amount of your rent money for electricity, cable, house insurance, taxes etc. but not CCA.
So, now you are getting the "rent" and declaring the income. How is your mom going to claim those expenses on her home? If you sublet an apartment, the landlord still has to get the rent. I think you should call CRA and outright ask them as to how to proceed. Don't get your mother in trouble for some short term bright idea of yours.
11:42 pm
November 18, 2017
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Tax avoidance is legal; tax evasion isn't. You, the CRA and whatever legal advice you get determine what's legal and what's not. I always try to get THREE people at CRA to tell me the same thing AND give me their names before I go with anything that isn't crystal-clear to me. Note that CRA always remind us that in case of disagreement between posted information, things told us on the phone or by mail, and The Tax Act that applies, THE LEGISLATION SHALL ALWAYS PREVAIL. Sometimes a review or a court filing may allow things to help the taxpayer if they've been given unclear or wrong information - as with some of the COVIC-19 benefits - but don't count on it!
RetirEd
RetirEd
9:28 am
July 18, 2017
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OP: I'm not a lawyer (nor play one on TV). But I don't think this idea is going to fly.
You said that your mom is giving you "consent" to rent out a portion of the house. But unless I'm mistaken, in terms of tax law (and other kinds of law) consent and ownership are categorically different.
Take another example. Let's say your mom buys a new car, and lets you drive it. With her consent, she then lets you lend it to a friend of yours for a few days. Your friend pays you $100.
Who is legally entitled to that $100? I would say it's your mom. She could, if she wanted, immediately turn around and gift that money back to you. But she would still be responsible for paying the tax on that income. She can't gift her tax obligation to you.
I would be amazed if this kind of thing were possible, because if so people would drive an 18-wheeler through this loophole.
I suggest you talk to a very experienced tax layers and get a written opinion prior to moving ahead. As noted above, a written opinion will not supercede tax legislation. However, the courts have recently signalled that in cases where taxpayers have breached the law they will consider it a mitigating factor if that taxpayer's a) position was reasonable and b) consulted with a qualified tax professional in whose opinion the plan was lawful.
Good luck
10:50 am
September 11, 2013
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Kinda agree, cristunity. But if mom gives you exclusive use of the car for three days and you lend it to a friend for one of those days, maybe that changes things.
In any event, if you're going to talk to a very experienced tax lawyer for a few minutes make sure to take a lot of money.
1:53 pm
April 6, 2013
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One doesn't need to own something to rent it out or earn income from it. One just needs permission from the owner to do so. It happens all the time with the heavy equipment in the construction and landscaping industry.
As well, some university students are provided a house by their parents. Parents allow the student to rent some of the rooms out to other students. The student collects the rent, reports it as rental income, and pays income taxes on the net rent after paying all the expenses.
I don't think it will be an issue as long as the income is reported and any income attribution requirements are followed.
2:25 pm
July 9, 2020
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I think that in a sublet situation, the second renter is obligated to pay rent to the landlord. So, if your mom is A, you are B, and the person subletting is C. A agrees that C is now renting INSTEAD OF B for the duration of the sublet contract (a defined period of time). C has the obligation to pay rent to A, not to you.
You should get legal advice or at least check the residential tenancy rules in your province. This is about landlord / tenant matters, and who declares what as "rental income" likely flows from that. I doubt that you would become the landlord simply by renting out what you're already renting -- your mom is still the landlord and I think would collect (and declare as rental income) the rent from the other person.
5:22 pm
October 21, 2013
Online
I think the discussion about cars is leading the conversation down the wrong path. If you take off in someone's car without their permission, it can be considered theft. It may also compromise the owner's insurance.
6:16 pm
April 6, 2013
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There's no sublet situation because there's no landlord-tenant situation.
Section 5 of Ontario Residential Tenancies Act, 2006 specifically excludes boarding arrangements:
Exemptions from Act
5 This Act does not apply with respect to,
…
(i) living accommodation whose occupant or occupants are required to share a bathroom or kitchen facility with the owner, the owner’s spouse, child or parent or the spouse’s child or parent, and where the owner, spouse, child or parent lives in the building in which the living accommodation is located;
…
It is highly unlikely that fatmansuen has own bathroom and kitchen in Mom's house.
7:13 pm
October 21, 2013
Online
That's true. As I understand it, this provision exists primarily in order to protect owners who are sharing common facilities, to enable them to quickly get rid of unpleasant housemates without the due process allowed under other kinds of tenancies.
However, I'm not sure that it makes any difference to the question of renting and taxation. If you receive income, it is taxable ( minus costs).
5:36 am
September 11, 2013
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Though I don't see the connection with using a car without someone's permission (I don't see anything being done here without owner's permission) I do agree any home insurance ramifications need to be settled.
And I agree that the Tenancies Act doesn't resolve the income tax treatment issue.
OP's original question was kind of vague, "is it legal for me to accept rent?", and folks have assumed he's wondering about the income tax treatment. Regarding that CRA Guide T4036 says "The person who owns the rental property has to report the income or loss."
I don't know what the attribution rules are when a parent allows adult children to reside in real estate parent owns, e.g. parent buys house for their child to live in during university, parent "rents" room to adult child in parent's home, etc. Aren't those rental situations? Maybe it's just an area CRA pays no attention to.
8:37 pm
October 21, 2013
Online
Bill said
OP's original question was kind of vague, "is it legal for me to accept rent?", and folks have assumed he's wondering about the income tax treatment. Regarding that CRA Guide T4036 says "The person who owns the rental property has to report the income or loss."
OP posted this under the Income Tax sub-forum, so it's reasonable to assume the question was about income tax.
Please write your comments in the forum.