The average Canadian pays an average of 43% of their entire overall income in taxes says Edmonton bookkeeping. In this includes a wide variety of taxes including income tax, CPP and EI. But other taxes such as GST and fuel tax just to name a few.
Therefore, many people often want to know how many expenses they can claim on their personal tax return. To help minimize the taxes that they end up paying. If people have rental income. Since that rental income is claimed as personal income.
Expenses that they incur maintaining their rental properties. Can also be considered personal expenses. That they can claim on their personal tax return. However, for the expenses that they can claim. There are also exceptions that they need to adhere to. To avoid making errors on their tax return.
People may need to advertise in order to find a renter for their property. And whether they do this through paying for advertising. Such as in a newspaper, a radio, even television or online advertising. This needs to be done through Canadian company. But they can be completely deductible expenses.
If a person pays a broker to find a renter for their space. Other they pay this broker a salary, or simply a finders fee. Edmonton bookkeeping says the money that is paid to the broker can also be claimed as a rental expense as well.
Property owners also must have insurance on their rental property. And this is an expense that they can claim on their personal tax return as well. However, they need to be mindful that host insurance policies cover more than a single year. But they can only claim a single year at a time.
That means they must be mindful to divide their premiums by however many years the policy is for. But then also remember to carry that policy forward to future years. So that they can continue to claim the insurance premiums in the future.
Even utilities are an expense that can be claimed. However, Edmonton bookkeeping says property owners need to ensure that it is listed in the rental agreement. That the property owner pays for the utilities. So that it can be considered a rental expense.
If they do not specify in the rental agreement, or if the renter pays utility bills themselves. This is not considered a rental expense.
If people are renting out a single room in their home. They also conduct utilities. But they also must ensure that it is included in the rental agreement that the property owner will pay the utilities. However, Edmonton bookkeeping says they need to ensure they are claiming percentage of the utilities.
Such as third or quarter of the utilities. Because if they claim over 50% of their utilities as a rental expense. They will lose their principal deduction of their home on their income taxes. Which would be significantly negative for the homeowner.
By understanding not only what rental expenses can be claimed. What exceptions are applied to each of those expenses. Can ensure that people who own rental properties can minimize their taxes I claiming those expenses on their tax return.
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It does not matter what reason a person has for owning rental properties says Edmonton bookkeeping. Whether they own one or several. Canada revenue agency allows rental income to be claimed as personal income on their tax return.
As long as the property owners are charging rent for the space and no other services. Such as cleaning, or providing meals. Which is very common if people are renting out a room in their home.
If they provide any other services, it stops being considered personal income. And starts being considered business income instead. If this is the case, then the rental expenses they incur can no longer be considered personal expenses.
Therefore, if people own rental properties. They need to ensure that they are not providing any additional services. Unless they are planning on operating their rental properties like a business. And then claiming their rental expenses as business expenses.
There are a lot of expenses that people can claim if they own rental properties. And maintaining repairs and maintenance on those properties is extremely important. While Canada revenue agency allows a property owner to claim the expenses of not just the materials for the repairs and maintenance. But the labour as well.
As long as the labour it is not the property owners own labour. This is an expense that can be claimed on their personal taxes. However, when it comes to repairs and maintenance. When paying for the materials and supplies. These cannot be considered capital expenditures what is considered a capital expenditure, is something that is going to have a useful life for longer than one year.
So while a property owner may be purchasing drywall, shingles, or paint. And have that be an expense that they can claim. If they buy a new fridge, stove or dishwasher. Those are considered capital costs, and cannot be claimed.
Also, the repairs and maintenance that a property owner does to their rental spaces. Cannot extend the life of their rental property. So while they would be able to patch a hole in the roof, or paint the outside of the house.
Edmonton bookkeeping says they would not be able to put a brand-new roof on, or put new siding on the house. Because those extend the life of the rental property.
However, they can still go ahead with things like a new roof, new siding, or purchasing appliance. But rather than being claimed as an expense. These actually get added to the value of the property. Increasing the value of the property owners assets.
There are many things to keep in mind when a property owner is claiming expenses related to their rental properties. And if they have any problems or questions.
They might find it much easier to hire and Edmonton bookkeeping company to help them get their personal tax return done properly. So that they can avoid getting into trouble with Canada revenue agency.