If person has purchased rental property, they might have lots of questions prior to their next tax return says Edmonton bookkeeping. And by knowing the answers to these questions. Can help ensure that they do their tax return properly. By considering all of their income and expenses properly.
Regardless of the reason why a person owns rental property. Or how many properties they own. The rental income they receive from these properties is considered personal income to Canada revenue agency. And should be included on their personal tax return. And not claimed as business income.
Even if they have many different rental properties, and end up doing that to generate their income. It is still considered personal income.
As such, property owners will have a wide variety of expenses associated with keeping and maintaining that property. And should understand that those expenses can be included on their personal tax return as well. That will help ensure that they minimize the amount of income tax they pay.
In fact, according to the Fraser Institute, they discovered that the average Canadian pays approximately 43% of their overall income in a wide variety of taxes. Including things like income tax, CPP and EI. But also including things like GST, and fuel tax just to name a few.
However, Edmonton bookkeeping says there are a wide variety of exceptions that need to be taken into consideration. In order to have property owners avoid making costly mistakes.
A great example of this is while advertising on the rental property is a deductible expense. Whether it is newspaper, radio and even television. In addition to social media or online channels. The property owner needs to ensure that the channels that they are advertising through our Canadian in order to be deductible.
Another expense that can be deductible but has exceptions. Our office expenses. Whether a property owner has one property or may be dozens. They might have a office dedicated to keeping these properties managed. However, Canada revenue agency has exceptions to what can be claimed as an expense.
For example, the office expenses are allowed to be deducted, unless it is considered a capital expenditure. Which Canada revenue agency classifies as anything that has a useful life longer than one year.
Therefore, while pens, paper, paper clips, staples and Post-it notes. Can be claimed as an office expense. Things such as calculator, stapler, chairs or desks. Are not considered claimable at all. Even if a property owner has dozens of properties. And needs these things in order to stay organized they are not claimable.
A person might become a property owner of a rental property simply because they were unable to sell their previous home. And needed to move for work. And since they were unable to sell their home, cited to rent it out.
This might require the property owner to travel to the rental property for collecting rent, supervising repairs or property management. And therefore, think that all of their travel expenses can be deductible. And while mileage and fuel can be considered travel expense.
Edmonton bookkeeping says Canada revenue agency will not allow meals or accommodations to be considered a deductible expense. Therefore, before they submit their taxes, should ensure that they have those expenses removed.
People become property owners of rental properties for a wide variety of reasons says Edmonton bookkeeping. And has many property owners wondering what they should put on their personal tax return as income. For the rent they end up charging their renters for the space.
While Canada revenue agency considers rental income as a personal income. This means a wide variety of expenses that a property owner incurs while managing their property. Can be claimed.
However, Edmonton bookkeeping says there are many exceptions to this rule. That if a property owner is not aware of. Or cannot commit to memory. Should ensure they get an Edmonton bookkeeping company to do their tax return. So they do not end up making crucial mistakes.
For example, repairs and maintenance is a deductible expense. Including cost of the materials and labour. With several exceptions. If the property owner provides the labour themselves. This is not considered deductible. And the repairs and maintenance must not include capital costs. Or extend the life of the rental property.
This means if the repairs and maintenance that a property owner conducts is replacing a fridge, a stove or any other appliance. This is not considered deductible.
If the repair extends the life of the property. Such as instead of patching a hole in the roof. The property owner puts a whole new roof on the building. This is considered extending the life of the rental property.
However, property owners need to take into consideration. That while capital costs and repairs and maintenance that extend the life of the property. Her not considered claimable expenses on their personal taxes. What they will do, is add to the overall value of their building. Increases their overall assets.
Therefore, it may be in a property owner’s best interest to continue to do those repairs and maintenance. But just account for them in a slightly different way.
Whether they are hiring someone to take over the maintenance of their repairs. Or if they have hired a property management company, or property manager to work on the properties. The amount that they pay these personnel can be considered a claimable expense.
If they have so many properties that they need to retain one or more staff on an ongoing basis. They can also include the benefits that they pay these employees as a personal expense as well. Therefore, if a property owner retains staff. They should definitely pay them benefits. Because those benefits will be deductible.
By understanding all of the different expenses that they can claim. And the exceptions Canada revenue agency has for those expenses. Then property owners will be able to ensure that they are minimizing enough of their taxes on their personal tax return.