Should I rent a suite in my home?

We hear of many people looking for ways to improve their income flow. Are you renting out part of your home to generate additional cash flow? If so then there are areas that you need to consider.

You need to advise your insurance broker or agent about the change. Often this does not affect your homeowner premiums but each company will look at the sitution in a slightly different way.

If you are making money from this rental then be sure to include any increase in your insurance costs as a direct expense. Be aware that you have to report any income on your income tax return.

You can claim other expenses such as a portion of the mortgage interest, maintenance, heating costs and property taxes. The portion equals the percentage that the tenant occupies in your home.

Whatever you have purchased for the tenants such as appliances, furniture or other such items for their daily living use can be claimed as a percentage of these items as capital cost allowance. Be aware of the pitfall of using this option, you will lose your principal residence exemption for the gain when you sell your personal home.

What happens when it is a family member who is renting the suite? If you are not charging enough to make a profit and only charging actual cost of the room and lodging then you do not have to report this to your insurance company or to the tax people. Since the family member is not likely a dependant or your spouse they do require their own tenant's insurance for contents and liability. You can ask that this person be added to your policy as an additional insured.

Talk to your accountant, financial advisor and insurance agent or broker to know the implications of renting a suite in your home.