As we move through 2025, significant updates to short-term rental (STR) regulations have come into effect across Canada and, to a lesser extent, in parts of the United States. 
These changes impact everything from tax services and licensing to zoning and seasonal restrictions.
At Ducharme & Associates, we work closely with property owners, real estate investors, and business professionals to help them stay informed, compliant, and financially prepared.
In this post, we break down the key regulatory changes and share what you need to know to navigate them successfully.
Federal Tax Changes in Canada: Compliance Matters More Than Ever
The most significant development this year is at the federal level in Canada. As of January 1, 2025, the Canada Revenue Agency (CRA) no longer allows tax deductions for short-term rental expenses if the property does not comply with local laws.
In practical terms, if your short-term rental lacks the proper licensing, zoning, or registration required by your municipality or province, you cannot deduct related expenses. This includes mortgage interest, utilities insurance, property management fees, and maintenance costs.
These expenses can no longer be used to reduce your taxable rental income, so if you earn $25,000 in gross rental income and spend $15,000 in expenses on a non-compliant property, you'll now be taxed on the full $25,000.
This shift emphasizes aligning rental operations with provincial and municipal regulations. Failure to do so can result in unexpected tax liabilities, significantly reducing your bottom line.
British Columbia: A New Registry and Fee Structure
British Columbia has implemented one of the country's most detailed and structured regulatory systems. Beginning May 1, 2025, all STR operators must register their properties and pay an annual fee. Here's how the fee structure breaks down:
- Primary residences: $100 per year
- Secondary suites, cottages, or laneway houses: $450 per year
- Strata Hotel Units: $600 per year
To encourage early compliance, B.C.
offers a 50% discount for those who register by February 28 and a 25% discount for those who register by March 31.
Starting June 1, STR platforms like Airbnb and Vrbo will be prohibited from listing non-registered properties. This measure is part of the province's effort to free up the housing supply and level the playing field for long-term renters and buyers.
Montreal: Seasonal Restrictions Now in Effect
Montreal has taken a seasonal approach to STR regulation. Effective 2025, STRs are only permitted from June 10 to September 10 each year.
This rule was introduced to curb the growing number of short-term rentals eating into the city's long-term housing stock. By limiting STRs to the summer months—a popular tourist season—the city hopes to balance tourism with resident needs.
If you operate a short-term rental in Montreal, you must know how to accommodate this seasonal window or risk fines and delisting from STR platforms.
Toronto: Higher Fees and Stricter Definitions
Toronto has reaffirmed its position as a city that restricts Short-Term Rental (STR) activity to principal residences only. This rule remains unchanged, but starting in 2025, the registration and renewal fee has increased to $375.
Additionally, hosts must now choose at the time of registration whether they will rent out an entire unit or just a portion of it (such as a bedroom).
This choice remains fixed for the registration period, meaning hosts must be more deliberate in how they plan to operate their rental throughout the year.
Federal Enforcement Support: Introducing STREF
To aid in enforcement, the federal government has launched the Short-Term Rental Enforcement Fund (STREF)—a $50 million program spread over three years.
This fund is designed to help municipalities and Indigenous communities enforce their local STR regulations. Funds can be used for staffing, inspections, legal support, or compliance technology.
This additional funding will lead to more proactive audits and enforcement actions, particularly in high-density urban areas and tourist hotspots.
What's Happening in the U.S.?
While Canada has implemented several coordinated national measures, the regulatory landscape in the U.S. remains more fragmented and localized. Still, similar trends are taking shape.
In many U.S. cities, Short-Term Rental (STR) operators must register or obtain a license. Zoning laws often dictate whether STRs are allowed in certain neighborhoods, and some areas cap the number of rental days per year. Hosts are also commonly required to collect and remit occupancy taxes.
For example, cities like New York require hosts to be present for stays under 30 days, while Los Angeles limits home-sharing to 120 days annually unless hosts obtain additional permits.
If you operate across the border, staying informed about your local rules is essential, as they can change quickly and without much warning.
Our Recommendations for 2025 and Beyond
Navigating the complex world of short-term rental compliance can feel overwhelming, but we're here to help.
Here are some best Short-Term Rental practices we recommend to all our clients:
Understand Your Local Regulations
Every city and province has different rules. Check with your municipality to understand what licensing, zoning, and tax regulations apply.
Register and License Promptly
Don't wait until the deadline. Many jurisdictions offer early-bird discounts—and enforcement penalties will apply to those who delay.
Keep Accurate Records
Maintain detailed records of your income, expenses, licenses, and compliance efforts. This documentation will be invaluable in the event of an audit or review.
Work with Professionals
Whether it's a tax specialist or a real estate advisor, having the right people in your corner can help you avoid costly mistakes and stay ahead of new regulations.
Plan for Flexibility
If your region introduces seasonal or usage limitations, consider diversifying your rental strategy or shifting toward long-term rentals in the off-season.
Conclusion
At Ducharme & Associates, we stay on top of regulatory shifts so you don't have to. Whether you're navigating tax deductions, property registration, or business strategy, we're here to guide you through every change with confidence and clarity.
If you have questions about how these 2025 changes affect your property, don't hesitate to contact us—we're here to help.
