Many property owners do what they can to maximize the amount of expenses they can claim on their personal tax return says Edmonton bookkeeping. And if people own property that they get rental income on. This rental income is considered personal income. And therefore, all of the expenses considered personal expenses as well.
The reason why this is important, is because according to the Fraser Institute. The average Canadian is paying approximately 43% of their entire income in a variety of taxes. Some of these taxes can include things like GST and fuel taxes. But also income tax, and CPP and EI.
The more expenses that people can claim on their personal tax return. The more that they can lower the taxes that they owe the government. And help save money for themselves.
Which is why it is important that property owners who rent out there properties can understand that any of their expenses that they incur on their rental properties can be claimed.
However, they must also realize that there are many rules that Canada revenue agency has set up. That will keep them from being able to claim all of the expenses. And they need to be very clear on what expenses they can claim. And what expenses they cannot claim.
Otherwise, if they file them on their personal tax return. They could end up in trouble with Canada revenue agency, By facing fines or even an audit.
One of the first things for property owners to keep in mind. Whether they are renting out an entire unit or building. Or if they are simply renting out a room in their own home. Is that in order for this rental income to continue to be considered personal income. They need to just be charging rent for the space.
If they start providing any additional services such as cleaning the house, lawn maintenance or shoveling the walk. Or even if they are providing meals to the people renting a room, and charging them extra. Will have Canada revenue agency considering that income a business.
And not only will that require them to fill out a different form to include with their personal tax return called a T2125 it will also mean that there rental expenses cannot be claimed on their personal tax return anymore.
One of the first types of expenses that a property owner will incur is an advertising expense to find a renter for that space. Whether that is them advertising on a website, wherein the newspaper for a renter.
Or even if they are utilizing a broker. Who will then charge a finders fee. Canada revenue agency specifies that as long as the methods to find a renter or Canadian. These can be considered a valid rental expense according to Edmonton bookkeeping.
Another expense that a property owner will incur right away is the insurance that they must maintain on their properties. And while the insurance is deductible often their personal income as a rental expense. They must be very careful how they claim those premiums.
All of these things can help keep property owner organized in knowing what expenses can be claimed. However, those who are not wanting to risk filing their personal taxes incorrectly. May simply hire and Edmonton bookkeeping company.
Who will be able to file their personal tax return. While ensuring that the rental expenses that they claim are completely valid. So that they can avoid making a mistake on their tax return.
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If property owners do not realize that there rental income can be considered personal income. They may also not know that they can claim many of the expenses they incur from maintaining their rental properties on their personal tax return as well.
Therefore, once a person has purchased their first rental property. They often will find it beneficial to consult with an Edmonton bookkeeping company. To understand what expenses they can claim. And what exceptions Canada revenue agency has on those expenses.
Often, insurance policies cover multiple years. But the amount that they can claim can only be for the current year. Therefore, they must figure out what percentage of their premiums they can claim. And only submit that is a rental expense. But then also remember to carry that premium forward. So that they are claiming the rest of their insurance premium in future years.
Even office expenses can be considered a rental expense. But Canada revenue agency specifies that no capital expenditures can be claimed for this type of income. And what is classified as a capital expenditure. Is an asset that has a useful lifespan longer than a year.
Therefore, office expenses that can be claimed could be things like paper, paper clips, and pins. But not things like a calculator that a property owner purchases, or their chair or filing cabinet for example.
When it comes to capital expenditures. Edmonton bookkeeping says office supplies are not the only thing that it is limited to. If a property owner needs to replace something in their property, such as a fridge, stove or hot water tank. These would also be considered capital expenditures.
And while these things cannot be claimed as a rental expense. It is important for the property owner to note that they can add this amount onto the value of their property. Which will increase the overall value of their assets.
And in fact, when it comes to repairs and maintenance. Canada revenue agency specifies that these are only minor repairs and maintenance. And how they classify that says Edmonton bookkeeping. Is it cannot extend the life of the rental property.
Therefore, minor repairs and maintenance can cover things like replacing carpet or flooring, holes in walls or roofs, or paint. It cannot cover things such as replacing siding on a home, or putting on a new roof.
It is important to keep in mind though, that major repairs such as siding and a roof, will add to the value of the building as well. So they need to ensure that their continuing to keep their receipts. So that they can ensure that their assets accurately select the work they have done on them.
There are many things to keep in mind when people are purchasing a rental property. And they should know that if they have any questions about what can be claimed. They can contact their Edmonton bookkeeping company. Will be more than happy to answer any questions they might have.