A person might have purchased the property for rental income, or have not been able to sell their previous home, And end up having significant questions for their Edmonton bookkeeping company. Whether it is a full house that they are renting. Or even renting a room in their house. There are many questions that people have.
One of the first questions that people have for their Edmonton bookkeeping company. When it comes to rental income. Is that if they can report rental income personally. Or if it is considered business income. And they must file as a sole proprietor. Or take out an incorporation document. To claim this money as a business expense.
Luckily, people can claim their rental income on their personal tax returns. Because it is considered personal income. Therefore, the Canada revenue agency will simply want to know the net income obtained from rental properties. Whether or not these are complete houses or condominiums. Or if it is a room rental.
Also, it is important for people to keep in mind that as long as they are charging rental income for space only. It will be considered personal income. Because once they start charging for additional services such as cleaning, landscaping, or even meals.
Then Canada revenue agency will consider that business income instead. And will require people filling out a form called at T2125 to claim that business expense on their personal tax return.
When it comes to claiming rental expenses. Many people ask their Edmonton bookkeeping company if they can claim expenses. And while they can claim a lot of the expenses. There are some rules that they have to follow.
And if they are claiming expenses for a room that they are renting out of their home. They can still claim the same expenses. But just a percentage of the expenses. Such as a third or quarter of the total expenses. But never over 50%.
If people end up claiming more than 50% of their expenses as a rental expense. They could lose the principal deduction of their home on their taxes. Which would and up costing them a significant amount of money.
One of the most common questions that bookkeepers get from people who have rental properties. Is if they can deduct travel expenses to go to their rental properties.
They might be going to supervise repairs, manage the property or even collecting rent. And while yes, they will be able to claim their travel to visit their rental property. This includes mileage and fuel only. But not meals or lodging on their trip.
By claiming rental income on their personal tax return. People have a lot of expenses that they can claim. And as long as they are following the rules, or asking their bookkeeper. They will be able to claim of a wide variety of expenses.
However, they need to be very careful to follow the rules carefully. So that they do not end up claiming something that is not allowed. And therefore, getting audited unnecessarily.
Edmonton Bookkeeping | Rental Expenses Are Claimed On Personal Tax Return.
While it is considered a personal income if people have rental income says Edmonton bookkeeping. Whether or not people can claim expenses associated with that rental income depends on a number of factors.
For example, people are allowed to advertise their rental property, and then claim that expense on their personal tax return. However, it is only as long as they have advertised on all Canadian channels. Such as Canadian newspapers, Canadian radio, and Canadian television. Or Canadian websites, and social media targeting Canadian residents.
Another example is people can deduct office expenses. But as long as they are not capital expenses. Canada revenue agency classifies something as a capital expense. If it is going to last longer than a year.
Therefore, stationary expenses such as pens, paper, paper clips and staples will count as an office expense. The stapler, a calculator or a chair is not going to be deductible.
Many people want to know if they are going to be able to deduct property taxes on their personal income tax as an expense. However, they need to ensure that they are claiming only the period that the property was available for rent.
Even conducting repairs on a property has rules on whether they can claim everything as an expense or not. For example, a person will be able to deduct the cost of repairs and maintenance of their rental property. This even includes the cost of labor. But the labor cannot include the person’s own labor. For example, if they did the repair work themselves.
And when it comes to repairs, they cannot deduct capital costs. For example, they can patch a hole in the roof. And that would be considered a deductible expense. But replacing an entire appliance like a fridge or stove. Is considered a capital cost. And would not count as a deduction.
In fact, a person cannot claim any maintenance that they have done that extends the lifetime of their rental property. If this is the case, the value must get added to the total value of the building. So that the value goes up. But they cannot claim the expenses that they incurred to make it more valuable.
Even the utilities can be deducted as a rental expense. But with one important caveat according to Edmonton bookkeeping. If they have specified in the rental agreement that the owner will pay for the utilities. They can deduct those as an expense.
However, if they have not specified that. Or if the renter pays for the utilities themselves. This would not be considered a deductible expense.
With the intricacies involved in understanding what rental expenses can be claimed. Many people find it is most advantageous to hire and Edmonton bookkeeping company to do their personal taxes. So that they do not end up making a costly mistake. And end up under the scrutiny of Canada revenue agency.