Sandy Hill, Ottawa
Sandy Hill: students on one side of the lease, landlords on the other
Sandy Hill has the University of Ottawa in the middle of it, and the tax questions in the neighbourhood arrive in matched pairs. Someone is renting out rooms and someone is renting one. A converted house holds four leases and one owner. A first-year student from overseas has no Canadian income at all and no idea whether Canada considers them resident. These are not variations on a single return. The landlord's problem is how much of a house has stopped being a home, and the student's problem is residency and a pile of credits they cannot use yet. Both go wrong quietly and only become expensive years later, one when the house sells and one when a graduate finally has income to shelter.
Why Sandy Hill is its own case
Start with the owner who lives in the house and rents rooms in it. That is not automatically a change in use. The CRA's long-standing administrative position is that renting part of your home does not trigger a deemed disposition of that part where the rental use is ancillary to the main use as your residence, you have not made structural changes to make it more suitable for renting, and you claim no capital cost allowance on it. Break any one of those and a portion of the house genuinely converts, with tax consequences on the eventual sale. Charging rent to two roommates in the bedrooms down the hall is ordinarily fine. That is a different situation from a purpose-built unit, and the difference is worth knowing before the renovation, not after.
What has to be reported either way is the rent, less a fair share of the mortgage interest, property tax, insurance, utilities and repairs. Fair share means a defensible basis, usually floor area, sometimes rooms, adjusted for periods the space sat empty, and applied the same way every year. An owner of a multi-unit conversion has the further question of whether they are running a rental or a business, which turns on the level of service provided rather than on the number of doors.
On the student side the two live issues are residency and timing. Residency for tax purposes follows residential ties, not a visa category, and someone can be a Canadian resident for tax while holding a study permit. Tuition generates a federal credit that is non-refundable, so it does nothing for a student with no tax to pay. Unused amounts carry forward indefinitely to the student's own future returns, and a limited amount from the current year only can be transferred to a parent, grandparent or spouse. Ontario no longer has its own tuition credit, so the provincial half of the old planning is simply not there anymore.
The work, as it applies here
Tax Expertise
Room rentals and student rentals reported correctly, residency determined for a student who has ties in two countries, and tuition amounts carried forward or transferred deliberately rather than by default.
Detailed Bookkeeping
A rent roll and expense record for a converted house with several leases, apportioned on a basis that stays consistent from year to year.
Strategic Planning
Working out before a renovation whether adding a rental unit converts part of the property, and what that does to the eventual sale.
Questions from Sandy Hill
- I rent two rooms in the house I live in. Do I have to report it?
- Yes. Rent received from roommates is income even when they are friends and even when it is paid by transfer with no lease. You deduct a reasonable share of the costs of the whole house against it, based on the space they occupy plus a fair portion of the common areas, and you can only deduct for the part of the year the rooms were actually rented. Two things do not work: taking the full house expenses against partial rent, and treating a below-cost arrangement as a business that generates losses to offset your salary.
- Will renting rooms cost me the principal residence exemption when I sell?
- Usually not, if you keep the arrangement modest. The CRA accepts that a home stays wholly a principal residence where the rental use is secondary to living there, the layout was not structurally altered to create a rental, and no depreciation is claimed against the rental income. Claiming capital cost allowance is the one that catches people, because it looks like a small annual deduction and it is the clearest signal that part of the property is being used to earn income. The exemption is not something you want to trade for a modest write-off.
- I am an international student at uOttawa. Do I even file a Canadian return?
- Very likely, and it is usually to your advantage. Residency for tax purposes is decided by your ties to Canada, such as a home here, a spouse or dependants here, and social and economic connections, rather than by your immigration status. A student who has settled here for the duration of a programme is often a resident for tax, which means filing on world income but also gaining access to credits and benefit payments that require a filed return. If your situation is genuinely unclear, the CRA will give a written opinion on residency if you ask for one.
- I had no income at all last year. Is there any point filing?
- Yes, for three reasons. Filing is what establishes and carries forward your unused tuition amounts, and without a return there is no record of them to use once you are working. It is also how benefit and credit payments get calculated, including quarterly amounts that do not depend on having earned anything. And it starts your RRSP contribution room, which is generated by earned income reported on a return. A nil return costs you an afternoon and protects credits that are worth real money later.
- My parents paid my tuition. Can they claim it?
- Only through you, and only in part. The credit belongs to the student regardless of who wrote the cheque. The student first applies it against their own tax payable for the year, and only the unused portion of the current year's amount can be transferred, up to a capped amount, to a parent, grandparent, spouse or common-law partner. Anything above that cap cannot be transferred at all, and it stays with the student to carry forward. Amounts carried forward from earlier years can never be transferred, which is why the decision has to be made in the year the tuition is paid.
- I own a student rental near campus and I handle everything myself. Is that rental income or a business?
- It depends on the services, not the effort. Providing space, heat, light, parking and laundry is a rental, reported on a rental statement, and the profit is not subject to CPP. Once you are supplying services closer to what a lodging house or a hotel provides, such as meals, cleaning of occupied rooms or regular linen, the CRA can treat the whole activity as a business, which changes the reporting, brings CPP into play on the net income, and changes how the property is treated on sale. Most owner-managed student houses in the area are rentals, but the closer you get to furnished short-stay accommodation the less certain that is.
Reading that applies
Also covered by this page
These neighbourhoods raise the same questions as Sandy Hill and are handled here.
- Lees Avenue An apartment strip on the Rideau River that also holds the University of Ottawa's Lees campus.