Until a property owner with rental income has been through one tax return before says Edmonton bookkeeping. They may not realize that certain rental expenses can be claimed.
They might not think that they can claim rental expenses on their personal tax return. Or they think that it has to be claimed as a business expense. However, Canada revenue agency considers rental income personal income. Therefore rental expenses can be claimed personally as well.
However, there are many exceptions that need to be applied to this. Which can be confusing especially for a person who is renting a property for the first time.
One of the first things they need to keep in mind, is that in order for it to be claimed as personal income. They must only charge for rent of the space and nothing else. And ten bookkeeping says if they divide any additional services for money. Such as cleaning the house, mowing the lawn or shoveling the sidewalk. That will be considered business income by Canada revenue agency.
Even people who are renting out a room in their home can claim that rental income as personal income. But then, they also must be very careful not to offer to provide meals at an additional cost. Because that will have them being considered a business that Canada revenue agency.
One of the most common questions Edmonton bookkeeping gets is if people can deduct utilities as a rental expense. Canada revenue agency allows this, as long as it is specified in the rental agreement. That the property owner is going to pay for the utilities.
They can even define utilities as more than just electricity, gas and water. They can include cable, Internet and even a landline. As long as it is specified.
Even if a person is renting out a room in their home. They can also claim the utilities as a rental expense. But they too must outline it in the rental agreement that they are going to pay for the utilities, and which utilities they will pay for.
And when it comes to a person renting out a room. They can only claim a percentage of their utilities. And Canada revenue agency requires that to be under 50%. Because if they are claiming more than 50% of their utilities as a rental expense. They will lose their principal deduction.
The next expense that many people have questions about is if they can deduct their property taxes as a rental expense. And while this is also allowed. It can only be for the times in the year where the property has been available for rent.
Therefore, if a person vacates their home in March, and it is not available for rent until May. They can only deduct property taxes for those eight months that it was available to be rented out to.
This can be a lot of new information for a property owner to keep straight. And while they can always contact their Edmonton bookkeeping company for advice. It might be more advantageous for them to hire them to do their taxes completely. So that they can avoid making costly mistakes.
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People who are purchasing rental properties needs to keep several things in mind this Edmonton bookkeeping. So that they can ensure that they can claim all of their rental income as personal income. And therefore claim many rental expenses as personal expenses.
Even if they have several rental properties. They can still claim all of this as personal income. Which can be very advantageous, because a wide variety of rental expenses may be deductible.
However, Canada revenue agency does have many exceptions when it comes to rental expenses. That is very important for property owner to know about. Prior to filing their taxes.
For example, the property owner can deduct their office expenses. Except capital expenditures, which are classified as anything the useful life longer than one year. Therefore, a property owner can claim their paper, Staples, pens and paper clips. But they may not be able to claim a calculator, a chair or filing cabinet.
Those capital expenditures that they are not allowed to claim extend to the repairs and maintenance of the property as well says Edmonton bookkeeping. While they can claim the cost of material and even labour for minor repairs and maintenance. They cannot claim capital expenditures.
This means, if a property owner has to replace furnace, or fridge or stove for example. These are considered capital expenditures, and while they cannot be claimed as an expense. They will increase the value of their property. Which will increase their overall assets.
Also, Canada revenue agency specifies maintenance or repairs to be minor in order for them to be able to be claimed as an expense. And what they consider minor, or repairs that are not going to extend the overall life of the rental property.
A great example of this is a property owner can paint the outside of their property. But not replace the siding. Because the siding will extend the life of their property.
However, again like the capital expenditures. It can add to the overall value of the building. Increasing their assets. So while it is not something that they can claim on their personal taxes as an expense. It is still advantageous for them from attacks purpose to do.
A person may be required to travel to get to their rental property. In order to do things like collect rent, and supervise repairs. And therefore, some of their travel expenses can be claimed says Edmonton bookkeeping.
What can be claimed is the mileage for the distance that they have travelled. And the cost of fuel in getting there. But it is not going to include their meals on the trip, or accommodations. Even if they have to spend the night for one or more nights.
It may be difficult for a person to keep all of these rental expenses and exceptions organized. Which is why it can be extremely helpful for a person who has purchased one or more rental properties. To simply hire Edmonton bookkeeping to help with their tax return.
So that they do not have to keep all of these rules in mind. And can focus on maintaining those rental properties instead.