Call it the Baby Boomer Blues. Across this great land a good chunk of that trendsetting demographic born between 1946 and 1964 are coming to the realization that they will need to postpone retirement.
Statistics show many of them piled on record debt trying to keep up with the Jones', and returns on whatever savings they managed to sock away are falling short of expectations in this sluggish economy.
As if facing an uncertain financial future in your fifties isn't enough, many boomers are also dealing with the emotional void left by children heading off to school and making their way in the world to pursue their own uncertain financial futures.
Well, cheer up empty-nesters. There could be a way to generate extra cash to get your retirement plans back on track, and its right under your roof.
Become a landlord
The time has rarely been better to rent out that empty room or basement. With an unpredictable job market, a cool housing market and stricter lending requirements, home ownership remains a dream for many and the rental market is booming. Being a landlord can be even more lucrative for homeowners in college and university towns.
Vacancy rates and rental fees vary across the country but to determine a fair price start by researching your home market through rental accommodation websites like, View It, Craigslist or even your local newspaper. List your rental space in whichever source you feel appeals to your circumstances and the type of person you want living in your house.
Remember the tax man
It's important to understand the tax implications involved with renting out a room for extra income.
One of the best tax breaks available to homeowners is an exemption on the amount a principal residence has appreciated in value when it is sold. That's a lot of money for Baby Boomers who have seen the value of their homes skyrocket over the years.
Here's the catch: that exemption could be threatened if more than half of the property is rented out, structural changes are made or depreciation on the property is claimed for tax purposes.
If you stay within the principal residence guidelines you are required to report rental income on your tax return and it will be taxed at your highest personal rate.
You can, however, defer paying tax on rental income until you are in a lower tax bracket (when you eventually retire) and boost savings at the same time by contributing it directly to your registered retirement savings plan (RRSP).
Another advantage of claiming rental income on your tax return comes in the form of deductions. A portion of expenses you need to pay anyway - mortgage interest, property taxes, house insurance, repairs and maintenance, utilities and even landscaping — can be written off against your taxes.
In some cases expenses such as advertising, office expenses and travel costs can be written off in full.
Keeping it in the family
The Canada Revenue Agency will make exceptions for homeowners who want to rent a room to friends or family members at less than fair market value. In some cases, for example, parents want to teach their children about the "real world" by imposing a token room and board fee.
In the CRA's eyes you are expected to incur a loss in those cases and aren't required to report the income. If you don't report the income, however, you can not claim deductions.
Tax implications vary for individual homeowners so it's important to speak with a tax professional. But with a good plan, it won't be long before you're singing a different tune.