Whether a person becomes a rental property owner in order to supplement their income according to Edmonton bookkeeping. Or if they become a property owner because they were unable to sell their home before they moved. There are many people who own rental properties. And earn income off the rent they receive.
However, many people especially when they have a rental property for the first time. And up with many questions for Edmonton bookkeeping companies. In order to ensure that they are claiming their income and expenses correctly.
The first question that they often have when it comes to their rental income, is if they have to report their rental income on their personal tax return. Or if this is considered business income.
Canada revenue agency allows rental income to be claimed as personal income. As long as the property owners are charging for rent only, and no additional services for additional fees.
For example if they charge additional fees for things like cleaning the house, shoveling the sidewalk in the wintertime, or mowing the grass in the summer. This will be considered business income.
People also might be renting out bedrooms out of their home. Or a basement suite. And they might be charging additional fees for meals provided. And in these cases, this will be considered business income instead.
The next question that people have when they have a rental property for the first time. Is if they can deduct advertising on their rental property. While Canada revenue agency allows the expenses to be claimed associated with finding a renter.
They need to ensure that they are advertising through Canadian channels, whether it is online or on social media. Or more traditional advertising methods such as newspaper, radio or television. Even if a person has been hired to find renters. And they get paid a finders fee. This fee is also considered an expense that can be claimed.
Property owners also want to know if they can deduct insurance on their rental property. And this is absolutely an expense that can be claimed. But property owners need to be very mindful when they go to clean the expense.
The reason why, is because insurance policies typically cover more than one year. Therefore, they should only claim the amount of insurance for one year at a time. And then remember to carry that policy forward. So that they can claim in future years as well.
Some property owners end up with a rental property. Simply because they were not able to sell their home before they moved. And in that case, must travel in order to manage their property. Therefore, another question that Edmonton bookkeeping gets very often is if property owners can claim the travel expenses they incur. Going back-and-forth between their home and their rental property.
While travel expenses are claimable, Canada revenue agency only allows mileage and fuel being claimed. While meals and accommodation are not claimable expenses. Even if the distance is quite large, and the trip lasts several days.
When property owners understand the expenses that they can claim, and which expenses are not valid. They will be able to ensure that they file their personal tax return properly. And make no mistakes, that could cost them.
It is very important for many people doing their personal tax return to claim as many expenses as they can according to Edmonton bookkeeping. So that they can minimize the amount of taxes that they owe at the end of the year.
This is extremely important, since the average Canadian pays 43% of their total income in a variety of taxes according to the Fraser Institute. Such as income tax, CPP and EI. But also additional taxes such as fuel taxes and GST just to name a few.
If people end up having rental properties, since that is considered personal income. There are many expenses that they can claim personally as well. However, property owners also have many exceptions. And are not able to claim all of the expenses. And will have lots of questions when they get their personal tax return.
One of the first questions that Edmonton bookkeeping gets is if a property owner can deduct management and administrative fees. On the property that they own. This can be a significant expense. Which is why it is very beneficial for property owners to know that they can deduct management and admin fees on their personal tax return.
Whether this is a person hired to manage the property or management company. These fees can be claimed on their personal tax return. Regardless of what they do for the property owner. Whether it is finding renters, collecting rent, managing the property or even doing maintenance and repairs.
Another question that property owners often have. Is if they can deduct their home-office expenses. This can add up significantly. Especially the number of rental properties property owner might have.
And while Canada revenue agency allows office expenses to be deducted. And ten bookkeeping says this does not include capital expenditures. Which is considered to be anything that has a useful life longer than a single year.
Which means while a property owner can claim things like pens, paper, posted notes, and paperclips just to name a few. They would not be able to claim things like desks, filing cabinets or chairs. Or even smaller things like calculators and staplers.
Another common question that Edmonton bookkeeping gets is if they can deduct their property taxes. And while this is also allowed. It can only be claimed on the period that the property is available for rent. So if the property had the property owner living in it for a portion of the year. Or if it was not rented out because they were doing repairs.
They would only be able to deduct property taxes for the months that it was available. Meaning they would have to divide their property taxes by twelve, and only claim the months that it was available for rent.
By understanding all of the expenses that they can claim. As well as all the exceptions to those expenses. Can help ensure that property owners do not end up making errors on their income tax. Requiring them to owe more taxes than they previously thought.