There are many people who and up having rental income according to Edmonton bookkeeping. Whether it is because they are trying to supplement their income. Or if they have a house that they are unable to sell. If people rent out their property, they often wonder about the income that they make, and the expenses that they incur.
The first question that most property owners have for Edmonton bookkeeping when they start renting out their property. Is if this income is considered personal, or business income. As long as all people are charging for is rent. Then this will be considered personal income on their tax return.
However, if property owners start charging additional money for additional services. This is now considered a business. For example, if people charge additional fees for landscaping such as mowing the lawn, or for shoveling the sidewalk in the winter. Or if they are renting a room in their house. They might offer meals for an additional price.
Once they add these additional services, it will be considered business income, and therefore expenses that they incur are now business expenses. But as long as all people are charging for is rent, both the income and expenses can be handled on their personal tax return.
However, Edmonton bookkeeping says that there are many exceptions to look out for when claiming rental expenses on their personal tax return. For example, if they end up having home office. They can claim many office supplies, such as pens, paper and Staples.
But they cannot claim any capital expenditures. And Canada revenue agency considers anything that has a useful life of longer than one year as a capital expenditure. So calculators, Staples, chairs and desks are not going to be claimable on personal income tax.
Since all property owners are required to have insurance. They often wonder if they can have insurance be claimed as a personal expense. This is absolutely possible, but property owners need to be very mindful. Since most insurance policies cover more than a single year.
They have to ensure that they are dividing the policy up by the number of years that it covers. And only claiming a one year window for each tax return. And then carry it forward to future years.
As well, property owners want to know if they can deduct property taxes as an expense on their personal tax return. And while Canada revenue agency allows this, have to ensure that they are only claiming property taxes for the periods that the property was available for rent.
So if the house was being lived in by the property owner for a period of time. Or if it was vacant in order to do repairs, and renters were not able to rent the property. The property taxes would not be claimable for those time periods.
When property owners understand all of the expenses that they can claim. And all of the exceptions to the rules, they will be able to ensure that all of the expenses they incur from owning rental property are claimed. However, due to the large number of exceptions, they find that hiring Edmonton bookkeeping company is much more efficient. To ensure no mistakes are made on their tax return.
Since rental income is considered personal income, Edmonton bookkeeping says people with rental properties can claim the expenses they incur on their personal tax return. Therefore it is very important for property owners to keep all of the receipts that they have. For each of their rental properties. So that they can claim them properly at the end of the year.
One of the most common questions that Edmonton bookkeeping gets from property owners is if they can deduct utilities on their personal tax return. And while the answer to this question is yes, they can claim utilities like gas, electricity and water.
Property owners also have to specify in the rental agreement that the property owner will pay for these utilities. And the renter will simply pay the property owner the agreed-upon amount.
However, they can include a wide variety of other services such as cable, phone line, and even Internet. As long as they specify what utilities are being covered in the rental agreement.
This is very important if people are renting out rooms in their home. They can also include in the rental agreement a portion of the utilities. However, Edmonton bookkeeping does caution property owners. Two only claim a percentage of their utilities such as a third or quarter. But never over 50%, or else property owners will lose their principal deduction.
Property owners can also deduct expenses related to hiring a property management company, or hiring a person to manage their properties. Regardless of the type of work that they are doing for the property owner.
That person could find tenants, collect rent, or do repairs and maintenance on the properties. These workers, whether they are on salary, or are considered independent contractors. Can have their wages be deducted as expenses.
If a property owner retains these workers on ongoing basis, they also may deduct the benefits that they have for these people. Making it much more manageable for property owners to pay their staff benefits. Because they can be claimed as an expense on their personal tax return.
One of the reasons why person might end up being a property owner with a rental property. Is because they were unable to sell their previous home before they moved into their new one. And in this case, in order to manage the property they may have to end up travelling. And sometimes significant distances.
They can claim many of the expenses that they incur travelling to their rental property. To do things like collect rent, or supervise pairs. And while they can claim mileage as well as fuel on their travels. They may not claim meals or accommodation. Even if they have travelled a significant distance, and have to stay for several days.
By knowing what expenses can be claimed on their personal tax return. Can help property owners minimize the taxes that they have to pay. And if they have any questions, they can call and Edmonton bookkeeping company to answer those questions, or help them complete their tax return. So that they do not end up making crucial mistakes.