One of the most common questions that Edmonton bookkeeping gets when it comes to a person buying rental property. Is if they can report their rental income on their personal tax return. Or if it is considered a business expense.
As long as the homeowner is charging strictly for rent and nothing else. That is considered personal income. And can be claimed on a homeowner’s personal tax return.
However, as long as the homeowner is charging for additional services such as shoveling the sidewalk, mowing the lawn or cleaning the house. Or if they are renting out a room in their house, providing meals. This is then considered business income by the Canada revenue agency. Which will require homeowners to fill out a specific form on their personal tax return?
The next question that Edmonton bookkeeping gets from homeowners. Is if they can deduct expenses that they incurred through renting out and maintaining that rental property.
Yes, there are many expenses that people can claim. But most of the expenses will have conditions on them. That homeowner must also be familiar with it. To avoid claiming expenses that are not valid.
A great example of this is advertising for the renter. While homeowners can advertise for renters, and then claim that as an expense. The exception to this is it must be in Canadian business. That they are doing the advertising in.
When it comes to finding a renter for the property. People can hire someone to find them, renters. They may charge the homeowner a finders fee. And that finders fee will then be deductible on their personal taxes.
If they hire someone to manage the property or do general maintenance on the property. They will be able to claim those fees that they pay that person or company. And they may even pay for their benefits according to Edmonton bookkeeping. As long as they are working for the homeowner on an ongoing basis.
However, if the homeowner is doing some of the management, admin, or maintenance. They may not claim their own time as an expense on their personal taxes.
A person may also want to claim their insurance on their rental property. And while this is claimable. They need to be very careful about how they claimant. Because most insurance policies cover more than one year.
So they need to ensure that they are claiming only the amount for that one year. And then carrying forward the policy to the future year. To be able to claim the rest of it. It is very important that the homeowner keeps this very organized. To ensure that they do not accidentally over claim something by mistake.
By understanding what can be claimed as an expense. And what exceptions to each of those expenses are. That can help property owners with rental spaces ensure that they are completing their personal tax return properly. So that they do not make an error, that could cost them taxes. Or even be audited by Canada revenue agency.
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Whether a person has one rental property or several, or even if they are simply renting out a room in their home, Edmonton bookkeeping says they need to keep several things in mind. To ensure they are completing their personal taxes properly.
A very common situation is a person ends up renting out a home that they had been trying to sell. They bought a new house, and not been able to sell the home. So to recoup some of their costs. They are renting it out.
Often, they have moved to a completely different city. And in order to rent out there home. They need help from a lot of people. Such as a management company, maintenance personnel, or even someone to help find renters for them.
While the expenses for these people can all be claimed. With that, they pay them occasionally, or they are working for the property owner on an ongoing basis. If they are working for them on an ongoing basis. They may even be able to deduct benefits that they might extend to them.
And while a person might be claiming expense for these important people to help them keep their space clean, prepared and rented. It may be necessary for the homeowner to travel to the home from time to time.
Edmonton bookkeeping says that it could be for things like collecting rents, supervising repairs, or any variety of management services. And when this is the case, many homeowners wonder if they can claim the travel expenses they have to travel to attend to their rental property.
And while yes they are allowed to deduct travel expenses on their personal tax return. This includes mileage and fuel only. But not meals or accommodation. Homeowners need to be very mindful of this. So that they do not end up submitting more receipts than they should.
Many people also wonder if they can deduct utilities on their personal taxes as a rental expense. This is absolutely possible says Edmonton bookkeeping. As long as it is specified in the rental agreement that the homeowner pays for the utilities.
If the rental agreement does not specify. Or if the renter pays for their own utilities. Then it is not going to be deductible. It might even be possible for the homeowner to pay for things like gas, water, and electricity. And then have the renter pay for things like cable, phone, and the Internet.
Even if a person is renting out a room in their home. They can claim these utilities as an expense. As long as they are claiming a percentage of them. But never more than 50%. Because that will cause them to lose their principal deduction.
There are many things that can be deducted if a person owns a rental property. However, while Edmonton bookkeeping can answer a lot of questions for a person. They may find it more beneficial to have the bookkeeping company do their taxes for them instead. So that they do not end up making a critical error.