Regardless of the reason why a person might own one or more rental properties says Edmonton bookkeeping. Canada revenue agency considers this personal income. And therefore, the expenses they incur maintaining that rental property. Can be considered personal expenses.
However, in order to ensure that their rental properties are considered personal income. They must only be charging for rent of the space and nothing else. Therefore, if they are providing services such as cleaning the house, shoveling the sidewalk or mowing the lawn. And even if they are providing meals, particularly if they are renting a room out of their house.
This is no longer considered personal income. Because Canada revenue agency considers this a business. Therefore, property owners need to be very careful that they are charging for rent only. So that they can continue to claim not only their income. But their expenses personally.
Many people wonder if this can include utilities. And Edmonton bookkeeping says the answer to this question is yes. And while most people consider utilities as gas, oil, electricity and water. People can even include things such as cable, a landline, or Internet as utilities as well.
However, it needs to be written up in the rental agreement that the property owner pays for those bills. So that they can claim those expenses on their personal tax return.
If a person is renting out a room or two of their home. They can also deduct utilities as an expense. However, they needs to ensure that they are claiming below 50% of the entire cost of their utilities. So that they do not end up losing their principal deduction on their tax return.
Even property taxes can be an expense that can be claimed personally. As long as the rental space that they are claiming property taxes on has been available for rent the entire time. Because if it has not been available for rent for the entire year. They can only claim a percentage of their property taxes.
Insurance that a property owner has on their rental units can also be claimed as a rental expense. But they need to be very careful that they are only claiming the insurance premiums for the current year. Since many insurance policies cover more than a single year.
They need to know how many years their policy is for. And only claim the amount for that year. But then also remember to carry that policy forward, and remember to claim the rest of the policy in future years so that they do not miss that important deduction.
There are many exceptions that property owners must keep in mind when they are doing their personal tax return. So that they do not end up claiming more rental expenses than they are entitled to. Which is why many property owners simply hire and Edmonton bookkeeping company.
They will work on their personal tax return on their behalf. So that a property owner does not end up making costly errors.
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There are many reasons why property owners would want to claim rental expenses on their personal tax return says Edmonton bookkeeping. Because according to the Fraser Institute, the average Canadian pays 43% of their income in a variety of taxes.
These taxes can include things such as income tax, CPP and EI. But also includes taxes such as GST and fuel tax just to name a few. By comparison, 37% of the amount of their income remaining goes towards their basic necessities such as shelter and food.
This is why many people want to know what they can claim on their personal tax return. So that they can minimize the taxes that they owe. And when people own rental properties. There are many expenses that they can claim. However, there are many exceptions as well.
By learning what expenses can be claimed, and what exceptions Canada revenue agency has. Can help ensure that property owners file their personal taxes properly. Do not and up with penalties, or an audit.
Great example of claimable expenses with exceptions. Our office expenses. The exception to this is capital expenditures. Canada revenue agency classifies capital expenditures as something that has a useful life longer than a year.
So this means deductible office expenses can be things like paper, pens, stables and paperclips. While things like a calculator, a stapler or a chair cannot. A property owner might consider some of the smaller expenses like a calculator inconsequential. But they need to know that this cannot be claimed on their personal expenses.
A person may have rental property because they simply were unable to sell it before they moved to their new home. And therefore, may occasionally need to travel to that rental property that may be in another city. In order to supervise repairs, collect rent, or otherwise manage the property.
Edmonton bookkeeping says they will be able to claim their travel expenses associated with this. But only in the form of mileage and the cost of fuel. Even if they have had to purchase meals, or stay in accommodations. Those expenses are not able to be claimed on their personal tax return.
Even repairs and maintenance are expenses that have many exceptions to them. And while they can purchase materials and supplies for the repair. If anything that they have purchased is considered a capital expenditure. This is not allowed to be claimed.
However, if they have incurred capital expenditures, that can get added to the overall value of their rental property. Increasing the property owners overall assets.
Also, the repairs and maintenance that they do on their rental units. Also not extend the life of their rental property. So they may be able to patch a hole in the roof, or paint their property. In claim that as a rental expense.
However, if they put a whole new roof on their property. This is not a rental expense. But it does get added to the value of their building overall.
This is very important that property owners claim their rental expenses properly. So that they do not and up getting penalized by Canada revenue agency. So to avoid this, they can hire and Edmonton bookkeeping company to do their personal taxes on their behalf. And avoid getting into trouble with Canada revenue agency.