Understanding how to claim rental expenses on a personal tax return can be complicated says Edmonton bookkeeping. And while people may be able to understand all of the exceptions to all of the expenses that they can claim.
After hearing about all of the different exceptions that a person needs to make on all the various expenses that they have. This can help them claim those expenses properly on their personal tax return. Or be inspired to hire the Edmonton bookkeeping company to file their taxes on their behalf.
One of the most common questions that people who have rental properties want to know the answer to. Is if they can deduct the cost of their utilities as a rental expense.
While the answer to this question is yes, people can claim utilities such as gas, oil, electricity, and water. They can even claim things such as phone and Internet and cable. As long as it is specified in the rental agreement. That the owner is going to pay for the utilities.
If the vendor pays for their utilities. Or if it is not specified in the rental agreement. Then they may not be deducted.
If people are renting out a room in their home. They also will be able to claim these utilities as a rental expense. As long as they have specified that the owner will pay for the utilities. But then also, the homeowner can only claim a percentage of those expenses.
If a person has incurred travel expenses in order to go to their rental property. To collect rent, supervise repairs, or otherwise manage the property. They can claim travel expenses.
However, this is travel expenses only such as mileage and the cost of fuel. But it is not going to include things such as accommodations or meals. This is important for a person to know so that they do not end up submitting receipts that are not valid deductions.
People even want to know if they are able to claim the property taxes as an expense on their rental property. And as long as they have specified the expense for the period that the property was actually available for rent. This can be a claim level expense as well.
Even the advertising to find a renter. Can be claimed as an expense. As long as the owner has ensured that they are only advertising through Canadian channels. This is very obvious when it comes to newspapers, radio, and television.
But if a homeowner is advertising online, or on social media. They need to be very careful to ensure that they are not deducting advertising incorrectly.
There are many things that need to be kept in mind when learning how to do duct rental expenses on personal taxes. And if a person has any questions, or is in doubt of anything. They can always ask their Edmonton bookkeeping company any questions they might have. Or better yet, hire them to take care of their taxes on their behalf.
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When it comes to deducting rental expenses from homeowners’ personal tax returns, Edmonton bookkeeping says there are many things to keep in mind. Including if there rental income and expenses can even be claimed on their personal tax return or not.
While most of the time, rental income is considered personal income. And not business income, requiring a person to claim their sole proprietor. Or have to incorporate to claim that income.
That is only if a homeowner is charging rent for space and nothing else. Because once they start throwing in additional services. Such as cleaning the house, doing landscaping or shoveling the walk. Or even offering deals.
Then Canada revenue agency starts considering that business income instead of personal income. Which will require homeowners to start filing their taxes differently.
But as long as they are charging rent strictly for space. And nothing else, then they will be able to claim that as personal income. And then claim expenses from that rental property personally as well.
However, there are many exceptions to what they can claim. Which can be confusing. This is why many people opt for hiring an Edmonton bookkeeping company to take care of their personal taxes. So that they do not end up making a mistake that could be very costly.
A great example of this, is if a person wants to deduct their office expenses. This is possible. But they can only claim office expenses that are not considered capital expenditures.
I capital expenditure is considered anything that has a useful life longer than one year. Therefore, when it comes to office expenses. A person might be able to claim Penn’s, paper, paper clips and staples.
But they will not to be able to claim, is the stapler to use, a printer or their desk for example. Which can lead to a lot of questions about what lasts longer than a year. But ultimately, there is not a lot of office expenses outside of paper and pens that a person might be able to claim.
Another example of an expense that is claimable. But has a lot of exceptions. Is when it comes to doing her peers and maintenance on the property. While these are deductible. Including the cost of labor. The first exception comes in when it is the homeowner themselves. This is not a labor cost that they can claim.
Also, when it comes to the maintenance and repairs of the rental property. This also cannot include capital expenditures. So anything that lasts longer than a year is not going to be allowed to be claimed.
Therefore, if a person had to buy new appliances for the home. These would instead get added to the value of the building to make the property more valuable. But not be deducted as an expense.
In fact, any repair and maintenance that is done to the property. Will not count as an expense. If it extends the life of the rental property. So a great example would be how a person could paint the house. And claim that as an expense. But not put new siding and a new roof on the house. Because that would extend life.
With all of these various exceptions, if homeowners are having a difficult time understanding what is a valid expense or not. They should simply hire the Edmonton bookkeeping company, to take care of this on their behalf. So that they do not end up claiming something that they should not be.