Tenants handling superintendent duties in exchange for reduced rent — What you need to know
Landlords sometimes give a tenant tasks related to the maintenance, management, or operation of their building, such as superintendent or cleaning duties. How the tenant is remunerated can have tax implications for them and the landlord.
Often, tenants provide these services in exchange for reduced or free rent. This is generally a taxable benefit whose value the tenant must include in their income, depending on whether they are considered an employee or self-employed.
The value of the benefit is based on the fair rental value, which is generally a reasonable estimate of the fair market value (FMV) of the rent for the dwelling.
The landlord must include the value of the benefit in their rental income.
Determining the fair rental value
The fair rental value is the rent that a tenant would pay for a similar dwelling on the market.
To determine the fair rental value, we recommend that you take the following into account:
- rent for similar dwellings in the area
- the dwelling’s characteristics (size, location, condition and services)
- rental market conditions
It is important to determine the fair rental value correctly. It is the basis for calculating the value of the tenant’s services and can be a deductible expense for the landlord.
Calculating the value of the tenant’s services
The value of the tenant’s services is equal to the consideration received by the tenant (financial or non-financial).
Examples
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The landlord must include the value of the benefit granted to the tenant in their rental income, though the amount included can generally be deducted (conditions apply).
Employee or self-employed
It is important to determine whether the tenant is an employee or self-employed in a given situation because their remuneration can have tax implications for them and the landlord.
A worker’s status is generally based on the following six criteria:
- subordination in the performance of work
- the financial or economic criterion
- ownership of tools
- the integration of the tasks carried out
- the specific result of the work
- how the parties define their working relationship
A person is considered an employee if, under a written or verbal contract, they agree to work under the direction or control of an employer for a set period in exchange for remuneration.
If the tenant is an employee, the landlord must:
- include the value of the benefits (for example, the value of the dwelling) in their remuneration
- make source deductions of income tax, contributions and premiums
- file RL-1 and T4 slips
The landlord must also include the value of the dwelling in their rental income.
A person is considered self-employed if they are free to choose how to carry out a contract and there is no subordination to their client.
In this case:
- The tenant must include the value of their services in their taxable income.
- No source deductions are required.
- The tenant must meet their tax obligations.
However, the landlord must include the value of the dwelling in their rental income.
It is important to determine the tenant’s status on a case-by-case basis, as an incorrect status can result in penalties. For more information, see guide IN-301-V, Employee or Self-Employed Person?, at revenuquebec.ca.
Good habits for landlords
To meet their tax obligations, landlords must:
- document their agreement with the tenant by drawing up a contract setting out the work and remuneration
- determine the fair rental value of the reduced or free rent in order to calculate the value of the taxable benefit
- include the value in their rental income
- determine whether the tenant is an employee or self employed
- make the required source deductions, report the benefit on the RL-1 slip and deduct employment expenses
- make sure that the reported income and deducted expenses match
- keep supporting documents in case of an audit
Summary
Giving maintenance or management tasks to a tenant has its benefits, but you must be mindful of the related tax obligations.
It is important to consider the specifics of each situation. When in doubt, check with Revenu Québec or a tax specialist.
References
For more information on rental income, see the following:
- Wages, Salary or Other Remuneration Paid to a Building Maintenance or Operations Worker
- Determining Your Employment Status
- Taxable Benefits (IN-253-V), which has information on the most common employee benefits
- Individuals and Rental Income (IN-100-V)
- Employee or Self-Employed Person? (IN-301-V)
- Costs for Work Carried Out on Your Property
Revenu Québec services
Revenu Québec offers a French-only online information session entitled Les propriétaires d’immeubles locatifs et la fiscalité. To find out how to participate, see the information under Citoyens at Séances d'information offertes à Revenu Québec.
Upcoming dates:
Revenu Québec also offers free individual and personalized meetings where you can ask about your rights and obligations as a landlord. For more information, click One-on-One Meetings.
More information is available under Landlord on Revenu Québec’s website.
