If people are purchasing properties in order to rent them out, Edmonton bookkeeping says this will be considered personal income. Many people might not even realize this, until they do their first personal tax return. But as long as they are not offering additional services. The rent they charge for properties they own. Will be considered personal income.
When this is the case, many of the expenses that they incur by maintaining their rental properties. Can be considered personal expenses as well. So that they can include them on their personal tax return. The reason why many people would want to says Edmonton bookkeeping. Is because it can help minimize the amount of taxes that they pay overall.
According to the Fraser Institute, the average Canadian pays approximately 43% in a variety of taxes on their entire income. Including GST, fuel tax, CPP and EI just to name a few of them.
In that in comparison to that, only 37% of what the average Canadian has left over after paying taxes. Goes towards their basic necessities such as food and shelter.
The first thing that is important to keep in mind. That Canada revenue agency requires that it be for rent only. Because once they start adding services for additional fees. This is then considered a business. Requiring them to claim this money as business profit, and they can no longer claim the expenses on their personal tax return.
One of the first questions that Edmonton bookkeeping gets from a property owner who has purchased a rental property for the first time. Is can they deduct utilities on their personal taxes. And while this is true. Property owners needs to know had of time what they need to do to be able to claim this as an expense.
They must included in the rental agreement that their renter signs. Specifying not only that they property owner will pay for utilities. But outlining what those utilities are. Because they might be assumed to include gas, electricity and water.
Those may not be the utilities that they are including. For example, in a condo unit that does not charge water. But also, because the property owner might decide to include things like cable, Internet, or a landline.
It is also important for person to know if they are renting out a room in their home. That they can also deduct up percentage of their utilities. But it also must be included in a rental agreement. And that they can only claim a percentage. That percentage must be under 50%.
Because of a person renting out a room or two in their home claims over 50% of the utilities as a rental expense. They will lose their principal deduction of the property.
Because of the large number of exceptions on the variety of rental expenses. That a property owner can incur by renting out their property. It is often most beneficial for anyone who has rental income.
To ensure that they hire and Edmonton bookkeeping company to do their personal taxes. So that they do not end up making mistakes that could cost them more money than they are trying to save.
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Since having rental income is considered personal income says Edmonton bookkeeping. A lot of the expenses associated with maintaining those rental properties. Can often be claimed on the property owners personal tax return.
However, there are many different exceptions that Canada revenue agency has on the variety of expenses that can be claimed. Making it very important that a property owner gets educated even before they have their first renter into their home.
And that they are hiring and Edmonton bookkeeping company to help ensure that they are doing their taxes properly.
It is quite possible that the owner will need to take out advertising in order to fill their rental properties. And whether they are advertising online, through newspaper, radio or even television. Canada revenue agency specifies that it must be Canadian companies that they advertise through. In order for it to be a deductible expense.
Even if a person is hiring a broker. And either paying them per job, a finders fee, or even paying them a salary. That is also a rental expense. Therefore, property owners need to ensure that they are keeping their receipts associated with finding renters.
Other people that they can pay to help them are property managers, and maintenance personnel. They might decide to pay these people on a per job basis. Or even retain them on an ongoing basis. Especially if they have a large number of rental properties that they own.
In that the amount of money that they pay them. Whether it is per job or a salary. Can be claimed. With the biggest exception being a property owner cannot do the work themselves, and then claim those wages on their personal taxes.
it is even a great thing to note says Edmonton bookkeeping. That if they do have these staff members on an ongoing basis. If they provide medical benefits. Those benefits are also going to be deductible as a rental expense. Which can be an incentive for people to ensure that the people working for them in maintaining their rental properties. Are being taken care of.
And whether a person is travelling a great distance in order to get to their rental properties. For example, if they moved to a completely different city. But were unable to sell their home. Or, if they simply have a lot of rental properties, and incur a lot of kilometres on their vehicle travelling between them.
Canada revenue agency allows people to claim travel expenses as rental expense that they can claim. However, they can only claim mileage and fuel. And not accommodation for meals. By keeping this in mind, can ensure that property owners are keeping the right to receipts.
And not making the mistake of thinking that they can claim everything, which might cause Canada revenue agency to audit them.
With all of the different expenses that they can and cannot claim. As well as all the exceptions to those rules. Property owners are often best to hire and Edmonton bookkeeping company. In order to take care of their personal tax return.
So that not only do they not have to remember those rules. But they can also ensure that they are not making a mistake by accident.