Make Some Extra Money By Renting Out A Portion Of Your Home

by Pam on October 12, 2012

A great way to make some passive income is to rent out a portion of your home that you are not using. If you have a basement that is nearly empty or a spare bedroom that you seldom use, you may want to consider making it available to a renter.

By renting out a portion of your home, you would be able to make some extra money to supplement your current income, without having to do a lot of work.  Of course, you wouldn’t want to rent out a portion of your home to just anybody.  You would want to find someone you could trust.

Before you make the decision to rent, you should consider the following:

  1.  What improvements do I need to make to the rental space and how much would those improvements cost me?
  2. Does the rental space meet safety regulations?  For instance, are the windows in the bedroom large enough to be used as a fire escape?
  3. How much would my house insurance go up if I had a tenant?
  4. How much would my utility bills go up if I had a tenant?  Would the utilities be included in the rent or would the tenant have to pay them on top of the rent fee?
  5. What type of person or people would I want to attract?  Would I be looking to rent to a couple or a single person?  Would I allow pets?
  6. What would be a fair monthly rent based on the current market?
  7. Should I furnish the rental space or let the renter bring in his or her own furniture?
  8. What amount should I ask for as a damage deposit?
  9. Are there any municipal restrictions that would not allow me to rent out part of my home?

Understand the Tax Rules

After you have taken these things into consideration, if you still think it’s feasible for you to rent out your home, then it’s important that you take note of the tax rules associated with renting.  You want to make sure that you understand what expenses you can claim.  You also want to be aware of the proper way to claim your rental income and how to make sure you are taking advantage of any tax deductions associated with renting.

The Canadian Revenue Agency (CRA) website is a great resource for Canadians who are considering renting out a property, whether it’s their own home or another rental property.  There is detailed information that will answer most, if not all, of your questions relating to rental income and expenses.

Your Principal Residence

The CRA mentions several times that If you decide to rent out a portion of your principal residence, you can claim rental income and expenses for the portion of your home that you use as the rental space.  However, it is in your best interest not to claim the depreciation of your home because if you do then if you ever decide to sell your home, you will be stuck paying tax on any capital gains from the sale of your home.

For more detailed information on renting out your home or another property, visit the CRA website.

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