When people have purchased rental properties they often have questions for their Edmonton bookkeeping company. About what expenses they can claim on their personal taxes. Or if they need to consider themselves a business. In order to claim these particular expenses on their taxes.
And it does not really matter what kind of rental property a business owner owns person owns. Or the nature of how they came to own that property. Whether they were unable to sell their previous home. Or if they have purchased the property in order to earn more money. Or even if they are renting a room in their home. It is possible to claim rental income. And expenses.
The first thing that people want to ask their Edmonton bookkeeping company is do they have to report their rental income on their personal tax return? This is very important for people to know. That yes they must claim it on their personal tax return. Because it is considered income. And Canada revenue agency will want to know the net income. That is earned from this rental income.
However, it is considered a personal income. And people do not need to incorporate it. Or consider themselves a sole proprietor in order to report their rental income. However, this changes if people are charging for more than just space.
For example, if the person is charging for additional services such as cleaning, housekeeping, landscaping, or meals. Then Canada revenue agency might consider this a business income instead. However, Edmonton bookkeeping says that they do not have to consider themselves a sole proprietor. Or fill out incorporation paperwork. They have to fellow a form called a T2125 for their personal tax return instead.
In fact, there are going to be a number of expenses that people can deduct off of their taxes as well. If they are claiming their rental income. Which is often enough for people to want to claim their rental income. So that they can claim a lot of expenses as well.
For example, people will be able to deduct their advertising for their rental property. In order to attract renters. As long as the advertising that they are using is Canadian. Therefore, people can use newspapers, radio, television. Or send out flyers and even use social media or online advertising. As long as these are all Canadian in nature.
Even if a person is working with a professional in order to help find a renter, and that person charges a finders fee. Then the finders fee that a person pays them. Is also considered a deductible expense.
By understanding all of the different expenses that a person can claim. As long as they are claiming their rental income. Can allow a person to fill out their personal taxes properly. To allow them to claim their income. But also fill out the expenses that they have incurred properly as well. And this is very important, to ensure that they are not leaving out important information.
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A person may have purchased a house to rent, or they have not been able to sell their home, and are renting it out which leads them to have many questions for their Edmonton bookkeeping company. On all of the various expenses that they can now claim on their personal tax return.
Since rental income is considered personal income and not business income. Then all of the rental expenses that a person incurs. Can be considered personal expenses. That they can then claim on their personal tax return.
Of the most common questions that bookkeeping gets, is can a person deduct insurance on their rental property? They say yes they can. But a person can only claim insurance premiums for the current year. Therefore, if they have an insurance policy that covers one year. They are only able to claim the amount for the current year.
For future years, they will be able to claim the rest of their insurance in the next year. As long as they make a note. And communicate well with their Edmonton keeping company to remember that that expense will need to be carried forward.
If a person has moved to another city or even another province. And they have to hire a management company or person. They will also be able to deduct their management or administration fees. This might be for someone who checks on the property or someone who collects the rent. Or even someone who finds tenants for the property.
People might even wonder if they are able to claim office expenses. When they are filling out their personal tax return. And the answer to that question is that yes they can. However, these are not capital expenses. Which means if they last longer than a year. They are not considered able to be claimed.
For example, this means that they can claim things like pens, paper and staples. But not things like the stapler itself, a calculator or printer. And definitely nothing like filing cabinets, chairs tasks.
People also want to know if they have to travel to that residence for any purposes. Our they claim their travel bill for that trip? While the answer to this question is yes, they can only claim mileage fuel. But not food or accommodation for the trip.
And finally, people often ask if they can deduct the utilities on their property. And while the answer is yes, they can deduct things like gas, oil, electricity, cable, and water. This is only as long as the rental agreement specifies that they will pay for those expenses.
If the rental agreement does not specify who pays for the utilities. Or if the renter pays for the utilities. Edmonton bookkeeping says they cannot claim these on their personal taxes.
It can be quite confusing for personal to figure out what is deductible and what is not deductible. Which is why it is incredibly beneficial to have a conversation with their Edmonton bookkeeping company. In order to figure out exactly what they can claim. If they are reporting their rental income on their personal tax return.