There may be many different reasons why a person owns one or more rental properties says Edmonton bookkeeping. They may have gotten into it in order to earn more income. Or, because they were unable to sell their home when they moved. Or they could even be renting out rooms in their home in order to help pay for the bills that they owe.
And regardless of the reason why people end up getting rental properties. Canada revenue agency will allow all of the income that they generate to be claimed as personal income.
The benefit that according to Edmonton bookkeeping. Is that they will be able to claim some of the expenses that they incur by maintaining those rental properties. On their personal tax return. Effectively minimizing the taxes that they have to pay at the end of the year.
However, while there are a wide variety of expenses that property owners can incur. Canada revenue agency has exceptions on almost all of the expenses. Making it very important for property owners to learn what those exceptions are. To avoid making mistakes on their personal tax return.
The first exception that they need to know, is when it comes to the rental properties themselves. As long as the property owners are charging for rent only and nothing else. That is claimable income on their tax return.
However, once the property owner starts providing additional services for additional money. Then Canada revenue agency considers this a business and the money earned as business income instead.
Examples of this would be if a property owner offers to shovel the walk in the winter, or mould along in the summer for additional money. Or housecleaning services. Or even meals provided if the property owner is renting out a room in their home.
If this is the case, Edmonton bookkeeping says that property owners simply need to fill out a form called a T2125 and file that form with their personal tax return.
Even before a property owner starts renting out the property that they have, or a room in their home. They need to understand that how their rental agreement is worded is very important.
For example, a property owner will be able to deduct utilities such as gas, electricity and water. As long as it is outlined in the rental agreement. That the property owner will pay for the utilities themselves. If it is not in the rental agreement, it is nothing that they can claim on their personal taxes.
Even if a property owner is renting out a room or several rooms of their home. They are still able to claim utilities, as long as they have specified in the rental agreement that the property owner will pay for the utilities. This is why it is important to understand this before taking on renters. So that they can ensure that the rental agreement says what they need to be able to claim expenses.
However, if the property owner is renting out one or more rooms in their home. They can only claim a percentage of the utilities. And while they can claim a third a quarter or any fraction, they should ensure that it stays under 50%. Or else they will end up losing their principal deduction on the home itself.
By understanding all of the different expenses that they can claim. In the exceptions. They will be able to minimize their taxes significantly. And if they have any questions, you can contact and Edmonton bookkeeping company to answer any of the questions they have.
Since property owners can rent out there spaces and claim that income personally says Edmonton bookkeeping. That means a wide variety of expenses that they incur can be claimed personally as well.
However, property owners need to be aware that for all all of the expenses that they can claim, those expenses have some conditions. That they should be aware of. Before they complete their income tax return and end up potentially making mistakes.
The reason why any property owners end up renting out their home, is because they were unable to sell their home for they moved. Even if they moved quite a distance away.
However, they might be required to travel back to that home in order to collect rent, and the property or even supervise with repairs.
While Canada revenue agency allows property owners to deduct travel expenses. This includes mileage and fuel only. While accommodation and meals are not allowed says Edmonton bookkeeping. Therefore, business owners should be very aware of this before they try to deduct meals and accommodations on their personal taxes.
Maintaining the property is also an extremely important aspect of being a property owner. And while repairs and maintenance are allowed to be deducted as an expense. Canada revenue agency says the exceptions to that is that property owners cannot include capital expenditures. Or if the repair and maintenance that they perform. Ann’s up extending the life of the rental property.
However, if the repair and maintenance does end up extending the life of the rental property. Or if they have purchased capital expenditures. This will get added to the overall value of the building. Increases the property owners assets. So it will give different sort of benefits. And should not be discounted.
A great example of this says ten bookkeeping. Is if a property owner must replace an appliance such as a stove, a dishwasher or a washing machine. Those are considered capital costs. But will also add value to their rental property.
As well, a property owner may be able to patch a hole in the roof, repaint their property, or replace a rug. And have that considered be repair and maintenance. If they replace the entire roof for example. Or if they put brand-new siding on the property. That will be considered adding value to the building. And not an expense.
By understanding how to take these things into consideration. Can help property owners ensure that they do not make errors on their tax return. However if they are concerned about making mistake. He can contact their Edmonton bookkeeping company. How them do the tax return on their behalf. And avoid making mistakes altogether.