It is very important for people who own rental properties to understand that this is personal income according to Edmonton bookkeeping. That the income they generate from renting out their properties needs to be claimed on their personal taxes.
Many property owners assume that this is business income. Or, that they do not have to claim it at all. Which is simply not true. However, when they do claim this income on their personal tax return. It will be able to start claiming a lot of the expenses that they have incurred for maintaining their parental property.
It is going to help them lower the amount of taxes that they owe at the end of the year. Which can be very significant. Because according to the Fraser Institute, the average Canadian pays 43% of their entire income in taxes. These taxes can include eggs such as income tax, CPP as well as EI. But it also includes things like GST, and fuel tax just to name a few.
Since so much of their income is already going to taxes. It can be very important for many people to minimize the taxes that they can pay wherever possible.
If people have purchased rental properties. Or have not been able to sell previous home, and of decided to rent it out. Or even if they are renting out a room or two of their home. These are all personal income amounts. And they should know what expenses they can claim on their personal tax return.
Property owners can deduct advertising for a renter as a rental expense. As long as they ensure that the method of advertising is Canadian. Whether this is newspaper, radio or even online. This amount can be claimed. Even if a property owner has hired a broker to find a renter. And then paid them a finders fee. This is a valid expenses well.
Since property owners also need to have insurance on their rental property. Edmonton bookkeeping says there insurance can also be a valid expense to claim as well. However, people need to be very careful that they are not inadvertently claiming to much as an expense.
Since insurance policies often are for several years. They must ensure that they premium that they are claiming is for the current year only. Then also remember to carry that policy and amount forward. So that each year they can deduct the correct insurance premium.
Even property taxes can be claimed. Although, it is important that a property owner is only claiming the taxes for the percentage of the year that their property has been available to be rented. And while this does not mean it had to have been rented out for that entire time. It had to been available for renter if one was available.
Claiming as many rental expenses as possible can help property owners bring their taxes down. But they also need to ensure that they know what the exceptions are. So that they can avoid making mistakes. They may find it very beneficial to hire and Edmonton bookkeeping company to do their personal tax return. So that they do not have to remember all of these exceptions, or possibly make a costly error.
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There are many things that property owners need to remember says Edmonton bookkeeping. About being a property owner, and a landlord. It is very important that they avoid making mistakes. Especially when they file their personal tax return. Because it could cost them not only in taxes, but if they have done something wrong and they get audited. They could be facing fines from Canada revenue agency.
One of the most common questions that people have when they purchase a rental property. Is if they can deduct the utilities off as a rental expense. Edmonton bookkeeping says this is definitely possible. But the property owner needs to ensure that they write it into the rental agreement. That the property owner will pay for the utilities.
And even then, they might want to specify what the utilities are. Because while many people assume utilities includes gas, electricity and water. They might decide to include cable, Internet or even a landline.
Even if a person is renting out individual rooms in their home. They can also deduct utilities as a rental expense. But only a percentage. Edmonton bookkeeping recommends a percentage such as a third or quarter of the entire utility amount. But whichever amount they choose. Needs to be under 50%.
The reason why they need to keep their amount of utilities that they are going to deduct under 50%. Is so that they do not lose their principal deduction on the entire property.
A person might need to travel in order to get to their rental properties. Particularly if they have moved, and were unable to sell their home. And decided to rented out instead. When this is the case, they can deduct travel expenses as well.
When it comes to travel expenses however, Canada revenue agency only allows for the mileage and fuel to be deducted as an expense. And even if they have had to pay for accommodation to spend the night, or pay for meals. Those are not claimable. Even if they are travelling in order to collect rent or supervise repairs.
Even the cost of repairs and maintenance can be deducted. As long as it is materials and labour for minor repairs. And that they labour is not provided by the property owner themselves.
And Canada revenue agency classifies a minor repair or maintenance as something that will not extend the life of the rental property. This can include things such as painting the interior or exterior of the property. Replacing carpets or flooring. Or patching a hole in a wall or roof.
But things that might not be considered minor repairs or maintenance. Would be new windows, new siding or a new roof for example.
These exceptions can be very complex for a first-time property owner to keep straight. Which is why many people find it beneficial instead to hire and Edmonton bookkeeping company. Who can manage all of those rental expenses. And ensure that the personal tax return gets filed properly and on time.