There are many questions that people have for their Edmonton bookkeeping company if they own rental property. They often want to know if they can claim the income they receive from these rental properties as personal income. Or if they need to claim that income as a business.
While most of the time, rental income can be claimed personally. This is if people are charging rent for the space only and nothing else. For example, if they provide any additional services. Such as cleaning the house, providing meals, or doing landscaping or snow removal.
The addition of services makes it a business income instead according to Canada revenue agency. And while people will not have to do a separate tax return to claim this business income. They will have to fill out a special form. This form is called a T2125.
Once people know that they can claim rental income personally. The next question they have their Edmonton bookkeeping company. Is if they can claim rental expenses on their personal tax return as well.
And while the answer to this question is yes. There are many exceptions that can make understanding everything that they can deduct a little bit more difficult.
For example, people can deduct the insurance they have on their rental property as an expense. But they can only claim premiums for the current year. Many insurance policies covers more than the single year. So they must be careful only to claim the portion of their insurance for that year only. And then carry forward to the rest of the policy into the following year or years.
Another question that many people have is if they can deduct office expenses. Answer to this question is also yes, but people may not claim capital expenditures. They consider capital expenditures anything that has a life of one year or more.
So while this means people can claim pens, paper, and posted notes for example. They would not be able to claim things like calculators, staplers or chairs. By understanding this, people need to be very careful not to deduct expenses that will be rejected by Canada revenue agency.
Often, one of the reasons why people have a rental property. Is that they are moving, but are unable to sell their home before they have moved. Especially if they have moved to another city. Many people wonder if they can deduct travel expenses. That they have incurred going back to their property, to do things like collect rent or supervise repairs.
People can claim travel expenses, but they can only claim mileage and fuel. They are not allowed to claim accommodation or meals if they have to spend the night.
When people have rental properties, it can be quite confusing for them to know what expenses they can claim on their personal taxes. Which makes it very important for people to hire and Edmonton bookkeeping company if they want to ensure that they can claim all of their expenses properly.
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When people have rental income, even if they are renting a room out of their own home, Edmonton bookkeeping says they often have any questions. While this income can be claimed as personal income. Requiring people to claim this on their personal tax return.
Many people often want to know what rental expenses they can claim on their personal taxes. For maintaining that property that is earning them personal income.
There is a wide variety of expenses that can be claimed legitimately. However, Edmonton bookkeeping cautions that there are exceptions to almost every rule. And people needs to learn what those exceptions are. So that they do not risk claiming more expenses than they should.
If people have to advertise in order to find a renter for their property. They can deduct advertising as an expense on their personal income. However, it needs to be through Canadian channels. So whether they advertise online, in a newspaper or on the radio. As long as these are Canadian owned, looking for Canadian renters. A can be deducted.
Even if a person hires a broker or an agent to find a renter. And they charge a finders fee. These finders fees can also be deducted as an expense on a person’s tax return.
Other expenses that can be claimed dealing with hiring people to help take care of things at the property. Include the fee for management company to manage the property. Or maintenance personnel or even superintendents that are going to help keep the property up.
Whether they are doing repairs, collecting rent, all of their salaries and wages can be claimed as a rental expense. However, if an owner is providing the labour themselves. They cannot deduct their own labour as an expense. Because it has not cost them any money.
People can even deduct benefits for these personnel, as long as they are working for the individual on ongoing basis. So it especially if a person has a number of rental properties. And maintain a regular staff in helping keep them managed. These cannot only be paid a salary, but benefits. And have both claimed as an expense.
If a person is charging rent in a room in their house. They also can deduct many of these expenses. However, they need to be very careful that they are only claiming a percentage of the expenses such as third of the bills or a quarter of the bills. To represent only a portion of their house that they are renting out.
So whether a person has rental property incidentally. Or if that is how they supplement their income. It will count as personal income on their tax return. Allowing them to claim a wide variety of expenses on their taxes. As long as they are being careful to know what they can claim. And what expenses are not valid to be claimed.
If people have a difficult time understanding what the exceptions are. They can eliminate this problem by hiring and Edmonton bookkeeping company to take care of their personal tax return. And not have to worry about which expenses are valid at all.