Short-term leasing – Beware of compliance!

Since January^1, 2024, a measure has been in place to disallow expenses incurred (including interest charges) to earn income from short-term rentals if these are deemed to be non-conforming. The aim of this measure is to encourage the long-term rental of residential properties in order to alleviate the current housing crisis.

Statistically, as of March 14, 2025, nearly 3,000 tourist homes in the Laurentians were registered with the CITQ (Corporation de l’industrie touristique du Québec), for a total of nearly 14,000 homes in the Province of Quebec.

Short-term leasing compliance

For the purposes of federal tax legislation, short-term rental means “for a period of less than 90 days” and is considered non-conforming when the residential property leased :

is located in a province or municipality that does not permit the operation of a short-term rental at that location;
does not comply with all provincial or municipal registration, licensing and permit requirements for rental operations

For the purposes of Quebec tax legislation, short-term rental means “for a period of 31 days or less” and is considered non-compliant when the residential property rented does not meet the registration requirements set out in the Tourist Accommodation Act and the Regulation respecting tourist accommodation.

Deductible expenses

The building must comply with federal and Quebec tax legislation to qualify for the full amount of rental expenses.

Disallowed expenses are calculated on the basis of the number of days in the year the property is a non-conforming short-term rental out of the total number of days the property is a short-term rental.

Accounting records

It is essential to keep accurate and up-to-date accounting records that include the following information:

The number of days during the year that the short-term rental is non-compliant;
The number of days during the year that the property is a short-term rental (conforming or non-conforming);
Total short-term rental expenses (conforming or non-conforming).

Important

If you’re in the short-term rental business, it’s important to check with the municipality where the property is located to ensure that you meet all municipal and provincial requirements, and to obtain all necessary permits. You must also be registered for lodging tax, GST and QST.

Members of the tax team are available to help you comply with tax requirements.