HST, MAT and Income Tax on Ontario Cottage Rentals: A Plain-English Guide
Last updated October 2026
Renting out your cottage brings three taxes into play: GST/HST on the stay, the Municipal Accommodation Tax (MAT) in a growing number of cottage-country towns, and income tax on your profit. Each has its own rules, and recent federal changes mean an unlicensed rental can now cost you your expense deductions. Here is a plain-English overview for Ontario cottage owners.
Key facts
GST/HST: registration is generally required once taxable sales go over $30,000 in four consecutive calendar quarters. Ontario's HST rate is 13%.
Platforms: booking platforms collect GST/HST for hosts who aren't registered. Registered hosts collect it themselves.
MAT: 4% in Huntsville, Gravenhurst, Bracebridge, The Blue Mountains and Wasaga Beach. Lake of Bays approved 4% starting in 2026.
Income tax: Form T776 for rental income, T2125 if it's a business
Non-compliant STRs: for tax years after 2023, the CRA denies expenses for rentals that break local licensing rules
Underused Housing Tax: eliminated for 2025 and later years
GST/HST on cottage rentals
The $30,000 small supplier threshold
The CRA says you are a small supplier, and don't have to register for GST/HST, if you do not exceed $30,000 over four consecutive calendar quarters. Once you go over, you generally have to register and charge HST, which is 13% in Ontario. You can also register voluntarily, which may let you claim input tax credits on business expenses.
The threshold is measured on a rolling basis, not a calendar year. A strong summer combined with a busy fall can push you over sooner than you'd expect. Ask your accountant how the test applies to you, including how revenue from associated persons is counted.
What Airbnb and other platforms collect
Under the CRA's platform-based short-term accommodation rules, the platform collects and remits GST/HST on bookings for hosts who are not registered. If you are registered, you remain responsible for charging and collecting tax on your stays, including platform bookings. Bookings you take yourself, such as from repeat guests, are a separate matter, so registered hosts need to charge HST on those too.
Municipal Accommodation Tax (MAT)
MAT is a municipal tax charged to guests on short stays. Rules, rates and who collects vary by town:
Huntsville: 4% on stays under 30 days, on the accommodation charge only. The Town says Airbnb does not currently collect it for Huntsville properties, so hosts have to collect and remit it.
Gravenhurst: 4% since January 31, 2023, on stays under 30 days, including licensed STRs.
Bracebridge: 4% since October 1, 2025, on stays of 28 consecutive days or less, including short-term rentals.
The Blue Mountains: 4% since January 6, 2025, on overnight stays under 30 days, including STRs.
Wasaga Beach: 4% from April 1, 2026 for eligible accommodation providers under By-law 2025-63.
Lake of Bays: A 4% MAT applies from January 1, 2026 (By-law 2025-139) to licensed STRs and other stays under 30 days, per the Township of Lake of Bays. Bookings made before January 1, 2026 are exempt.
MAT is usually charged on the room portion only, and whether a platform collects it depends on the municipality. Check your listing settings. Never assume it's being handled for you.
Income tax: T776 or T2125?
The CRA says the deciding factor is "the number and types of services you provide." If you provide only the space and basic services such as heat, light, parking and laundry, you generally have rental (property) income, reported on Form T776. If you add services like cleaning, security or meals, it starts to look like a business, reported on Form T2125. The more services you offer, the more likely it's a business.
The difference affects things like capital cost allowance and how losses are treated, so get professional advice on how your cottage should be classified.
Non-compliant rentals lose their deductions
This rule matters most for cottage owners. For tax years after 2023, the CRA denies expense deductions for non-compliant short-term rentals:
A short-term rental is a residential property rented or offered for rent for less than 90 consecutive days.
It's non-compliant if it's in a place where STRs aren't permitted, or if it doesn't meet all provincial or municipal registration, licensing and permit requirements.
If you're non-compliant for part of the year, the denied amount is prorated by the number of non-compliant days.
So a cottage operating without a licence in Muskoka Lakes, Huntsville or Oro-Medonte risks municipal penalties and being taxed on gross rent with no deductions for expenses.
The Underused Housing Tax is gone, from 2025
Budget 2025 proposed eliminating the Underused Housing Tax (UHT) "for the 2025 calendar year and subsequent years". It became law when Bill C-15, the Budget 2025 Implementation Act, No. 1, received Royal Assent on March 26, 2026. The 2022, 2023 and 2024 years are not affected, so any filings or penalties for those years still stand.
Want to know what your cottage could earn? Call 705-996-6769 to talk with our local team at Homeseeker Vacation Homes, or see how our cottage rental management works.
Frequently asked questions
Do I have to charge HST on my Ontario cottage rental?
Only if you're registered. Registration is generally required once taxable sales exceed $30,000 over four consecutive calendar quarters. If you're not registered, platforms like Airbnb collect GST/HST on your platform bookings.
Which Ontario cottage towns charge a Municipal Accommodation Tax?
Huntsville, Gravenhurst, Bracebridge, The Blue Mountains and Wasaga Beach each charge 4%, and Lake of Bays approved a 4% MAT starting in 2026. Rules vary, so check with each municipality.
Can I deduct expenses if my rental isn't licensed?
For tax years after 2023, the CRA denies deductions for short-term rentals (under 90 consecutive days) that don't comply with local licensing or that are in places where STRs aren't permitted.
Do I still need to file the Underused Housing Tax return?
Not for 2025 or later. The UHT was eliminated for those years when Bill C-15 received Royal Assent on March 26, 2026. Obligations for 2022 to 2024 remain.
This article is general information, not tax, legal or accounting advice. Tax rules and municipal rates change, and your situation may differ. Confirm with the CRA, your municipality and a qualified accountant before you file or change how you collect tax.
