CRA Can Deny Every Short-Term Rental Expense You Claimed. Here Is the Calgary Trigger Nobody Mentions.

Yes, CRA can deny every dollar of expense you claimed against a short-term rental. Section 67.7 of the Income Tax Act denies deductions on a per-day basis for any short-term rental that breaks provincial or municipal rules, and subsection 67.7(4) removes the normal reassessment deadline entirely. In Calgary the trigger is simple: no valid business licence, no deductible day.

Summary

• The rule: Income Tax Act s.67.7(2) denies expenses relating to a “non-compliant short-term rental.” Enacted by Bill C-69 (44th Parliament), S.C. 2024, c. 17, s. 16, assented to 20 June 2024.
• It is proportional, not all-or-nothing. The denied amount is calculated by formula: total deductible expenses, multiplied by non-compliant days, divided by total short-term rental days.
• There is no time limit on reassessment. Subsection 67.7(4) applies “notwithstanding subsections 152(4) to (5)” and lets the Minister reassess “for any taxation year.” The usual statute-barred protection does not apply.
• It has applied since 2024. It catches outlays made and expenses incurred after 2023.
• The one amnesty is spent. Subsection 67.7(3) deemed a rental compliant for all of 2024 if it became fully licensed by 31 December 2024. That rule does nothing for 2025 or 2026.
• The Calgary trap: Calgary licenses stays of up to 180 consecutive days. The Income Tax Act defines a short-term rental as less than 90 consecutive days. The two definitions do not line up, and most hosts assume they do.

This article is general information, not tax or legal advice. Short-term rental taxation is fact-specific and the consequences of getting it wrong are severe. Confirm your own position with a Canadian tax professional before filing or amending anything.

Table of Contents

1. What Section 67.7 Actually Does
2. Why There Is No Longer a Reassessment Deadline
3. The 90-Day and 180-Day Gap That Catches Calgary Hosts
4. The Calgary Compliance Checklist for 2026
5. A Worked Example (Hypothetical Numbers)
6. What to Do If You Have Already Filed
7. Common Mistakes
8. Frequently Asked Questions

What Section 67.7 Actually Does

Section 67.7 denies the deduction of expenses to the extent they relate to a short-term rental that is not compliant with the province or municipality it sits in. The operative wording of subsection (2) is blunt:

Notwithstanding any other provision of this Act, no amount is deductible in computing income in respect of a short-term rental for a taxation year, to the extent the amount is a non-compliant amount for the taxation year.

Income Tax Act, s. 67.7(2)

“Notwithstanding any other provision of this Act” is the phrase that matters. It overrides the ordinary deductibility rules. Mortgage interest, property tax, insurance, utilities, cleaning, platform fees, repairs, and capital cost allowance all sit inside the scope of what can be denied.

What counts as “non-compliant”

The Act defines a non-compliant short-term rental as one located in a province or municipality that either does not permit the operation at that location, or requires registration, a licence or a permit that the rental does not hold or comply with.

Read that second branch slowly. It is not limited to outright bans. A city that simply requires a licence has, by requiring it, created the conditions for federal expense denial the moment a host operates without one. Calgary requires one.

The denial is proportional, and the formula is public

Hosts frequently assume this is all-or-nothing. It is not. The “non-compliant amount” defined in s.67.7(1) is calculated as A × B ÷ C, where:

• A is the total of all amounts that would otherwise be deductible for the use of the property as a short-term rental that year
• B is the number of days in the year the property was a non-compliant short-term rental
• C is the number of days in the year the property was a short-term rental at all

The practical effect: every single day you operate unlicensed adds to the numerator. Getting licensed in July does not repair January through June. It only stops the bleeding from the date compliance begins.

When it started, and the amnesty that has already closed

The enacting provision applies to “outlays made and expenses incurred after 2023,” so the rule has been live for the 2024, 2025 and 2026 tax years.

There was one transitional break, in s.67.7(3). A rental that was non-compliant during 2024 is deemed compliant for the whole of 2024 if it came into full compliance with all registration, licensing and permit requirements by 31 December 2024. That was a one-year retroactive cure and it is now spent. It never applied to properties in places where short-term rentals are outright prohibited, because it only addressed the licensing branch of the definition.

Why There Is No Longer a Reassessment Deadline

This is the part that changes the risk calculation, and it is the part most coverage skips. Subsection 67.7(4) reads:

Notwithstanding subsections 152(4) to (5), the Minister may make any assessments, reassessments and additional assessments of tax, interest and penalties and any determinations and redeterminations that are necessary to give effect to subsection (2) for any taxation year.

Income Tax Act, s. 67.7(4)

Subsections 152(4) to (5) are the normal limitation periods, the rules that make a personal tax year statute-barred after roughly three years from the notice of assessment. Section 67.7(4) sets them aside for this specific purpose, “for any taxation year.”

What that means in practice: a 2024 return that would ordinarily become safe in 2028 never becomes safe with respect to this issue. There is no year at which an unlicensed 2024 operating season stops being reassessable. Most tax exposure decays. This one does not.

The 90-Day and 180-Day Gap That Catches Calgary Hosts

Here is the point almost nobody makes, and it cuts both ways.

The Income Tax Act defines a short-term rental as “a residential property that is rented or offered for rent for a period of less than 90 consecutive days.” Note “or offered for rent.” Listing alone engages the definition, whether or not anyone books.

Calgary uses a completely different number. Since 1 April 2025 the City’s definition is:

a short-term rental means the business of providing temporary accommodation for compensation, in a dwelling unit or portion of a dwelling unit, for periods of up to 180 consecutive days, by advertising or otherwise listing with a Short-Term Rental Company.

The City of Calgary, Business licence changes

So the two regimes overlap but do not match. The consequences are worth setting out plainly.

Length of stay	Calgary licence required?	Inside ITA s.67.7?	What it means for you
Under 90 days	Yes	Yes	Full exposure. Unlicensed days deny expenses.
90 to 180 days	Yes	No	You still need the City licence, but s.67.7 does not reach these stays.
Over 180 days	No	No	Ordinary long-term tenancy. Neither regime applies.

Two failure modes come out of that table. The first is the host running 120-day corporate stays who assumes no licence is needed because “that isn’t short-term.” Calgary says it is. The second is the host who has been told their entire portfolio is exposed to s.67.7 when the medium-term half of it is not. Both are expensive in opposite directions.

The Calgary Compliance Checklist for 2026

Calgary’s rules were rewritten effective 1 April 2025 following a unanimous Council decision in December 2024. If your understanding of the regime predates that, it is out of date in at least three material ways.

Licence classes and 2026 fees (CAD)

The class is now set by whether the property is your primary residence, not by how many rooms you rent. All figures below are from the City’s 2026 Business Licence Fee Schedule and are in Canadian dollars. Verify against the current schedule before budgeting, as the City updates it annually.

Licence type	Base, new	Base, renewal	Fire fee	Total new	Total renewal
Short Term Rental, Primary Residence	$172 CAD	$131 CAD	$117 CAD	$289 CAD	$248 CAD
Short Term Rental, Non-Primary Residence	$510 CAD	$260 CAD	$117 CAD	$627 CAD	$377 CAD
Short-Term Rental Company (platforms)	$3,000 CAD	$3,000 CAD	n/a	$3,000 CAD	$3,000 CAD

Against a denied year of deductions, a few hundred dollars is not a close call. That is the entire argument for compliance in one line.

What Calgary requires before it issues the licence

• A passed fire inspection. This is a hard gate. The City states the property must pass before a licence can be issued.
• Proof of insurance, issued by an insurer registered in Alberta, with a minimum liability of $2,000,000 CAD. The licence applicant must be the policy holder.
• A fire safety plan, showing the address, room designations, all accessible floors, fire exits, evacuation procedure including a meeting place, fire department contact information, egress windows, smoke and carbon monoxide alarms, extinguishers, exit paths from every bedroom, and a legend.
• Proof of ownership, by City title search or a Land Title you supply. If you do not own the property you need written authorization from the owner before listing it.
• Proof of residence if you are applying for the primary residence class.
• Secondary suite registration with the City, if applicable.
• A myID Citizen account. A myID Business account will not work for a short-term rental licence.

Operating rules that carry a fine

Calgary publishes a $1,000 CAD penalty per offence, on conviction, for eight specific breaches under Business Licence Bylaw 32M98. Each one is a live compliance failure for s.67.7 purposes as well.

• Offering a room without a window, or letting guests sleep in one
• More than two adults per room, regardless of room size
• Overlapping bookings. One booking per dwelling at a time, though multiple rooms under one reservation is fine
• Failing to include the licence number in any advertisement
• Failing to post emergency contact information, meaning a name, phone number and email reachable 24 hours a day, in a conspicuous location
• Failing to keep the required guest record, or to produce it to the Chief Licence Inspector on demand

That advertising rule deserves emphasis. The licence number must appear in every listing, which means you cannot lawfully advertise before you hold the licence. Since the federal definition also captures a property “offered for rent,” an unlicensed live listing is a problem on both levels at once.

Operating without a licence at all is an offence under Bylaw 32M98, but the City’s published short-term rental penalty table does not state an amount for it and the figures circulating online contradict each other. Confirm the current amount with the City directly rather than relying on a secondary source.

Three things that changed and are widely reported wrong

• Condo board consent is no longer required by the City. Removed 1 April 2025. You still have to comply with your condo bylaws and settle disputes with the board yourself, but the City no longer collects the consent.
• Renewal fire inspections are now risk-based. The Calgary Fire Department ranks properties by risk and schedules from that list, so a renewal may or may not draw a physical inspection. The pre-issuance inspection for a new licence is still mandatory.
• The non-primary residence moratorium is not in force. Council approved a mechanism under which the City would pause issuing new non-primary licences if the CMHC purpose-built rental vacancy rate falls below 2.5%. It has not been triggered, and the City has announced no pause. Treat it as a conditional future risk when you model a non-primary acquisition, not as a current bar.

A Worked Example (Hypothetical Numbers)

The numbers below are invented for illustration. They are not drawn from any real property, client or portfolio.

Assume a Calgary condo operated as a short-term rental for all 365 days of a tax year. Total expenses that would otherwise be deductible against that use come to $42,000 CAD: mortgage interest, condo fees, property tax, insurance, utilities, cleaning, platform commission and supplies. The owner did not hold a business licence until 1 September, so the property was non-compliant for 243 days.

Applying A × B ÷ C:

• A = $42,000
• B = 243 non-compliant days
• C = 365 short-term rental days
• Non-compliant amount = $42,000 × 243 ÷ 365 = $27,961 CAD denied

The owner deducts $14,039 instead of $42,000. The additional $27,961 of income is taxed at their marginal rate, with interest running from the original balance-due date, and CRA can raise that reassessment at any point in the future.

Now change one variable. The same owner licenses the unit on 1 January instead. Cost: $627 CAD for a new non-primary licence, plus the insurance and fire safety work. B becomes zero and nothing is denied. That is the whole trade.

What to Do If You Have Already Filed

Work through this in order. Do not skip to step four.

1. Establish your licence dates. Pull the actual issue and expiry dates for every property and every year from 2024 forward. Guessing is what creates the exposure.
2. Separate stays under 90 days from stays of 90 days or more. Only the first group falls inside s.67.7. Your booking export gives you this.
3. Count non-compliant days per property, per year. This is B in the formula. Days the property was listed but unbooked still count as short-term rental days, because the definition covers property “offered for rent.”
4. Take it to a Canadian tax professional before you amend anything. Voluntary disclosure, amended returns and simply waiting are materially different strategies with materially different outcomes, and the right one depends on facts this article cannot see.
5. Fix the licence today regardless. Every day you stay unlicensed adds to B. Compliance from here forward is the one lever entirely within your control.

Common Mistakes

• Assuming the platform handles compliance. Airbnb and Vrbo collect and remit certain taxes. Neither holds your business licence for you, and the $3,000 CAD company licence they pay is not yours.
• Treating “I got licensed eventually” as a fix. Outside the spent 2024 transitional rule, mid-year compliance is prorated, not retroactive.
• Believing a statute-barred year is safe. Subsection 67.7(4) removes that protection for this issue specifically.
• Applying the 180-day figure to the tax test. Calgary’s number governs licensing. The federal test is under 90 consecutive days.
• Forgetting that an unbooked listing still counts. “Offered for rent” is in the statutory definition.
• Advertising without the licence number. A separate $1,000 CAD municipal offence, and evidence of the underlying non-compliance.
• Assuming a corporation is insulated. Section 67.7 applies to persons and partnerships. The structure does not change the outcome.

Frequently Asked Questions

Can CRA really deny all my short-term rental expenses?

It can deny the portion attributable to non-compliant days. If the property was non-compliant for the entire year, that is effectively all of them. The denial is calculated as total deductible expenses multiplied by non-compliant days, divided by total short-term rental days, so a full year of operating without a required licence produces a full year of denied expenses.

How far back can CRA reassess a non-compliant short-term rental?

There is no limit for this issue. Subsection 67.7(4) applies notwithstanding subsections 152(4) to (5) of the Income Tax Act and permits reassessment “for any taxation year.” The normal three-year statute-barred window does not protect you here, and the rule reaches back to expenses incurred after 2023.

Does section 67.7 apply to a 120-day stay in Calgary?

No. The federal definition covers rentals of less than 90 consecutive days, so a 120-day stay sits outside s.67.7. Calgary still requires a business licence, because the City licenses stays of up to 180 consecutive days. You need the licence, but that particular stay is not exposed to the federal expense denial.

I got my Calgary licence partway through 2025. Am I covered for the whole year?

No. The deemed-compliance rule in s.67.7(3) applied only to the 2024 taxation year, and only where full compliance was reached by 31 December 2024. For 2025 and later, the denial is prorated across the days you were actually non-compliant.

What does a Calgary short-term rental licence cost in 2026?

Per the City’s 2026 fee schedule, a primary residence licence is $289 CAD new and $248 CAD on renewal, including the $117 CAD fire fee. A non-primary residence licence is $627 CAD new and $377 CAD on renewal. Platforms pay a separate $3,000 CAD annual company licence. Confirm current amounts with the City before you budget.

Is the Calgary moratorium on new non-primary licences in effect?

Not currently. Council approved a mechanism that would pause new non-primary residence licences if the CMHC purpose-built rental vacancy rate drops below 2.5%, but the trigger has not been met and the City has not announced a pause. Existing licences and new primary residence applications would not be affected in any case.

The Bottom Line

Short-term rental licensing used to be a municipal matter with a municipal-sized penalty. Section 67.7 changed the arithmetic. A licence that costs a few hundred dollars a year now protects a full year of deductions against a reassessment power that never expires.

Two dates decide your exposure: the day your licence was issued, and the length of your average stay. Most operators have never written either one down.

The federal picture is shifting elsewhere too. The Underused Housing Tax was eliminated for 2025 and later years, though the 2022 to 2024 obligations survive and provincial and municipal vacancy taxes are untouched. We covered that in our guide to whether you still have to file the Underused Housing Tax in 2026.

Get the Property Side Handled

Compliance is an operations problem before it is a tax problem. If your licensing, insurance, guest records and turnover are living in a mix of inboxes and spreadsheets, the documentation you need at reassessment time will not exist when you need it.

Wise Media builds the systems short-term rental operators run on, from the direct booking website through to the operational stack behind it. If your property business has outgrown manual tracking, tell us what you are running at our intake form and we will scope it properly.

Sources: Income Tax Act, s. 67.7 (Justice Laws); The City of Calgary, Short-term rental rules and regulations; The City of Calgary, Business licence changes. Legislation and municipal fees change. Verify against the primary source before acting.