All money you receive as a result of an accommodation sharing arrangement is taxable for income tax purposes and you should report it as rental income when you file your income tax returns.

As per CRA; 

You should report any income you receive from renting property or accommodation sharing on your income tax return and file Form T776, Statement of Real Estate Rentals with the Canada Revenue Agency (CRA). For help on filing a statement of rental income and expenses, go to Completing Form T776, Statement of Real Estate Rentals.

Make sure you keep detailed records of all rental income you earn and any expenses you incur to earn that income in case the CRA asks to see them.

How to deduct rental expenses on your income tax return;

Generally, you can deduct any reasonable expenses you incur to earn rental income. However, when you rent only part of a building where you live, such as a room in your house, you can claim only the expenses that relate specifically to the rented part of the building. This means that you have to divide generic expenses for the property on a reasonable basis, such as the percentage of the total living area that is being rented. You also have to divide the expenses in line with the proportion of time the room is rented.

Example: If your annual electricity bill for your entire home is $1,000 and you rent out a room in your home for three months, you cannot deduct the full $1,000 as an expense. If the area being rented makes up 10% of the area of your home and the room was rented for three months, then the allowable expense would be $25 (10% x 3/12 x $1,000 = $25).

For more information, see Expenses you can deduct.

Thanks for the information.

One of my concerns was that it's probable that I won't make a profit on this rental in the near future, and CRA notes in your first link that "You cannot claim the expenses for renting part of your property if you have no reasonable expectation of making a profit."

An ancillary question has occurred to me - will I be able to claim the principal residence exemption on the property when I come to sell it, or will I need to pay capital gains on the portion of the property used as a rental?

Thanks again

If you are not claiming "rental" and it's just a cost-sharing arrangement, then the answer is "No" you will not have any Capital Gains.

Thanks very much for your reply.

I'm still not clear on whether this should be treated as a cost-sharing arrangement or rental income given that I don't think I have a reasonable expectation of profit and the tenant is claiming the payments on his income tax return.

Unfortunately, we can only give you the options you need to make that decision. Please contact CRA and they will advise the best course of action for you. 

Hi Steve,

Could you let me know how you decided to handle this situation? I have a similar situation with renting to friends below market value.

Thanks!

Coby

As per the Canada Revenue Agency Renting below fair market value

You can deduct your expenses only if you incur them to earn an income. In certain cases, you may ask your son or daughter, or anyone else living with you, to pay a small amount for the upkeep of your house or to cover the cost of groceries.

You do not report this amount in your income, and you cannot claim rental expenses. This is a cost-sharing arrangement, so you cannot claim a rental loss.

If you lose money because you rent a property to a person you know for less money than you would to a person you don't know, you cannot claim a rental loss.

When your rental expenses are consistently more than your rental income, you may not be allowed to claim a rental loss because your rental operation is not considered to be a source of income.

You can claim a rental loss if you are renting the property to a relative for the same rate as you would charge other tenants and you expect to make a profit.

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