Whether a person has just purchased their first rental property says Edmonton bookkeeping. Or if they have several rental properties. Canada revenue agency considers this personal income. And since rental property is considered personal income. Many of the expenses that a property owner incurs. Can be claimed on their personal tax return.
However, there are many exceptions to this rule. And before a property owner ends up filing their personal tax turn and making many errors. They should contact their Edmonton bookkeeping company. In order to find out what those exceptions are.
The first thing that property owners need to mind. Is that as long as they are only charging for rent and nothing else. The rental income that they bring in will be considered personal. However, if they add any additional services. And charge additional prices. This is considered a business by Canada revenue agency.
For example, they might offer to clean the home for an additional fee, or shovel the walk or mow the lawn. Or, if the property owner is renting out rooms in their home. They might charge additional for providing meals. And in that case, these are considered business instead of personal income.
However, property owners do not have to worry about creating a corporation in order to claim this as business income. But instead just fill out a form called a T2125. And complete that and send it along with their personal tax return.
Many property owners also want to know if they are going to be able to deduct utilities from their personal tax return as well. And the answer to this question is also yes, provided the property owner has specified that they will pay the utilities in their rental agreement.
And if they have, they do not just have to claim gas, electricity and water. They could specify additional services such as cable, Internet and even landline. That will allow them to claim those as expenses as well.
Even if a person is renting rooms out of their home. They will be of the claim utilities. However, just a percentage of them. And regardless of what percentage it is, should never be over 50% is Edmonton bookkeeping. Or else they will end up losing their principal deduction on their home.
The next thing that property owners need to keep in mind, is that they might have a wide variety of office expenses. That they purchase in order to help them manage their properties. Especially if they have several of them. However Canada revenue agency will specify that no capital expenditures can be included in office expenses.
And Canada revenue agency classifies anything that has a useful life of longer than one year is a capital expenditure. So a property owner may be able to claim things like pens, paper, post it notes for example. It would not be able to claim things like filing cabinets, desks, or even a calculator and a stapler.
Property owners who are renting out their properties may be surprised to realize that this is considered personal income says Edmonton bookkeeping. And as such. Can claim a wide variety of expenses on their personal tax return.
However, for all of the expenses that they are able to claim. Canada revenue agency has a wide number of exceptions to these expenses. Making it extremely important for property owners to learn what they can claim and what they cannot.
And with the large number of exceptions there are. It might be in the property owner’s best interest to simply hire Edmonton bookkeeping to do their taxes for them. So that they do not have to worry about doing it incorrectly and getting penalized.
Since maintaining the properties and doing repairs and maintenance is often a large part of being a property owner. Many people are happy to hear that repairs and maintenance can be claimed on the personal tax return.
While the cost of materials and labour are some of the expenses that can be claimed. If the property owner does the labour themselves. This is not claimable. And nor is the expense if it is a capital expenditure. Such as replacing appliances, such as a refrigerator, dishwasher or washing machine for example.
In addition to that, if the repairs and maintenance extends the life of the rental property. Then it also is not available to be counted as a personal expense on the property owners tax return.
However, if the repairs and maintenance do extend the life of rental property, or the do purchase capital expenditures for the property. Those things can add to the value of the building itself. Increasing the property owners assets instead of being claimable expense on their tax return.
A great example of the difference between the two. Is while a property owner would be able to patch the roof of their rental property and claim that as an expense. Replacing the entire roof would not be. But it would add to the value of the building overall.
A property owner may also choose to hire a management company or a property manager directly. That will be able to do things like maintenance, collect rent or supervise repairs. And the fee that they pay the company or the wage they pay their property manager. Can be claimed as an expense on their personal tax return.
If a property manager owns several properties. And they are able to retain one or more person as staff on an ongoing basis. Not only can they claim salary’s that they pay their staff. But they can also get benefits for their staff and have that considered an expense that can be claimed on their personal tax return.
With all of the various exceptions to the rules. Many property owners find for more value in hiring Edmonton bookkeeping to take care of their personal tax return. So that they know they will not make significant errors. So that they can focus on taking care of their properties that they own. Instead of trying to do their tax return themselves.