There might be many reasons why people might have rental properties that they own says Edmonton bookkeeping. And regardless of the reason why they have these rental properties. Canada revenue agency allows them to claim the income they receive from those rental properties on their personal tax return.
While rental income is not considered business income. This is only if the property owners are charging specifically for rent only and nothing else. If they start providing any other additional services, that stops being considered personal income. And is then a business. So if people are cleaning the house, mowing the lawn or shoveling the sidewalk. Or if they are renting out a room in their home, providing meals.
Canada revenue agency no longer considers this personal income. And while it is considered business income instead. This does not mean that property owners need to fill out a separate business tax return. They just need to fill out a specific form called a T2125 for their personal tax return to claim that income properly.
Since the rental income can be claimed on personal taxes. Edmonton keeping says people can claim a wide variety of expenses that they incurred. Keeping, renting out and maintaining their property for the renters.
A great example of this is property owners can claim utilities as a rental expense. Provided the rental agreement specifies that the property owner will pay utilities. They may charge which ever they wish for their rent to cover these expenses.
And the utilities that they claim can include a wide variety of services such as electricity, oil, gas and water. But also can include things such as phone, Internet, and cable.
Even if people are renting out a single room in their home. They can still claim utilities as a rental expense. Provided they specify in the rental agreement that utilities will be paid by the property owner.
And that the owner only claims percentage under 50% of the utilities as an expense. Or else, they will lose their principal deduction. Which will be significantly negative to their personal tax return says Edmonton Bookkeeping.
It is even possible for people to claim their travel expenses that they incurred for travelling to their rental property. This is especially beneficial if people have their rental property in another city. And they can claim travel expenses for wide variety of reasons. Such as needing to supervise repairs, manage the property, interview renters or even collecting rent.
However, it is very important that people understand that they can only claim their mileage and cost of fuel as an expense. And even though they might need to purchase meals or stay in accommodations because of the length of their trip. Meals and accommodations are not considered deductible travel expenses for rental properties.
It is very advantageous for property owners to be able to claim as many rental expenses as they can. However, knowing which expenses are valid, and which ones are not allowed by Canada revenue agency is important. To ensure that people do not end up making mistakes on their personal tax return.
They can either call or Edmonton bookkeeping company to find out answers to their questions. Or simply asked them to complete their personal tax return on their behalf. So that they completely avoid these mistakes.
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Even if people own rental properties and use that as a business says Edmonton bookkeeping. Rental properties are considered personal income. As long as they are strictly charging for rent of the space and nothing else.
Therefore, many people might have a large number of rental properties that they own. They might maintain a staff as well. From brokers to find renters, and interview them to see if they would be a suitable fit.
Two management staff, maintenance personnel or even superintendents. The wage or salary that these staff members get paid can be claimed on the property owners personal tax return as an expense. And if they are retained on an ongoing basis. Even their benefits may be deductible as well.
However, people should keep in mind that if they are providing labour themselves for collecting rent, maintaining the property or even doing repairs. The labour that they provide may not be claimed as an expense on their tax return.
When it comes to doing repairs. This is a necessary part of being a property owner on our rental space. However, Canada revenue agency also has rules about what repairs and maintenance costs can be claimed as an expense.
Anything that is considered a capital cost cannot be claimed. And a capital cost is an asset that will last longer than a year. So while a property owner may need to buy appliances that have stopped working. Such as a fridge, stove or dishwasher.
These are considered capital costs, and are not able to be claimed as a rental expense on the property owners personal tax return. However, it will increase the value of their rental space. Which can be added to their assets. And this makes their overall worth higher.
As well, any repairs that are done to the property itself says Edmonton bookkeeping. Cannot extend the life of the rental property in order to be claimed as an expense on personal taxes. A great example of this, is a property owner can catch a hole in the roof and claim that expense. But they cannot put on a whole new roof. And claim that as an expense.
However, if any of the repairs and maintenance that are done to the property can be added to the overall value of the building. Increasing the value of that space, and adding to the person’s overall assets that they own.
Therefore, property owners need to consider every time they do repairs or maintenance on the property. What would be considered a capital expense, or what would extend the life of the property. So that they can added to the value of their assets. And the rest can be claimed as an expense on their taxes.
Keeping these things in mind is very important when people are doing their personal tax return. And if they make a mistake, that could result in Canada revenue agency doing an audit. Which is why many people who own rental properties simply hire and Edmonton bookkeeping company to help them with their tax return. So that they know they are doing it accurately.