I rent out this apartment but I was hoping to rent out a room to cousin just temporarily so I can get a little help for rent; since I’ve been cut hours from work during COVID-19. Is that okay? It won’t back fire on me would it. It doesn’t mention anything in the rental agreement about subtle renting
The best way to resolve a tax-legal situation (such as this one) is to provide ALL (not just part) of the tax-relevant facts to your professional tax preparer / tax advisor / CPA.
Casual or part-answers, based on casual, or part facts, are not likely to be the correct ones, even in telephone part-discussions with part of the facts with a CRA employee or anyone else.
In considering either ASKING, or alternatively ANSWERING, legal issues, such as Tax-legal issues, one needs to bear in mind the following considerations:
It is sometimes said that “free advice is worth exactly what you paid for it”.
That needs a qualification: if the advice given is negligently wrong, then the giver of the advice may well find him- or herself liable in tort for the negligent performance of services, or negligent misstatement.
The mere fact that the advice was free will not afford a defence to any claim.
Having your cousin stay with you is not subletting. They can stay with you as your guest and contribute towards the expenses without any problem. The problem arises if your cousin pays the landlord any money or discusses anything with them (even maintenance or repairs).
Subletting is when you leave the apartment and your cousin stays, while paying you rent (even if you continue to pay the landlord). You must have the intention of returning to the apartment for it to qualify as a sublet. Not sure where you are located but In Ontario you cannot charge more rent than what you are being charged.
I agree with Theresa. For those who are looking to share expenses, not share a lease contract, the simplest solution is to have a guest who shares living expenses such as - utilities, food, etc. If you are clear on your terms you may wish to document this in an informal signed agreement to outline the intentions and specifics.
The biggest risk is not tax, nor landlord. It is eviction. You need to be clear the duration and leaving/quitting/ moving out triggers and rights. Those are the worst horror stories that I have heard in the past.
The only thing I would add to this discussion is that if you live in Manitoba, people paying Rent often want to claim the $700 Rent Credit when they file their tax return. In shared accommodations like this, only ONE person can claim this rent credit (typically it would be the original tenant assuming you still live there). It would then be up to you if you want to share part of that $700 credit with your cousin (prorated based on the time your cousin lived with you).
As an aside, if you rented a suite in someone’s personal residence, the home owner already receives this credit on their property tax statement, so this credit is not available to the renter. The exception here would be if the home was sub-divided, with the rental space having its own unique entrance, kitchen facilities, washroom, etc (like a duplex).