Many people own more than one property due to circumstance says Edmonton bookkeeping. And therefore, and up having a lot of questions when they do their taxes at the end of the year.
Whether it is because they purchased a house at a great price and decided to rent it out. Or if they were unable to sell their home. Before moving, which is why they rented it out. Many people want to know how to account for this income on their personal tax return.
The first question business owners have for Edmonton bookkeeping is if they have to report this rental income on their personal tax return. While the answer to this question is yes, it is considered personal income. Whether this is a complete house that they are renting out. Or if people are renting a room in their home.
It is important to note that this is not considered business income. If people are only charging for the rental of the space and nothing else. However, Edmonton bookkeeping says that if are providing any additional services. Such is cleaning the home, shoveling the sidewalk or mowing the lawn for example. In Canada revenue agency will consider this business income instead.
This is included when people are renting out a room of their home as well. And might also include things such as meals or laundry service. And with the rent. If they are providing these additional services. They simply have to fill out a form called a T2125. And file that with their personal tax return at the end of the year.
The great thing about this, is since it is considered personal income. There is a wide number of expenses that people can deduct from their taxes. That they incur through maintaining this property.
If a homeowner needs to advertise this rental property in order to get a renter. Where that this is through newspaper, radio or online channels. Or if a person has had to hire someone to find a renter. And then paid a finders fee. These are all expenses that are deductible. As long as the homeowner has advertised within Canadian channels.
The next expense that many property owners wonder about is the insurance that they are paying on their rental properties. Edmonton bookkeeping says this is also a deductible expense. However homeowners need to be very careful. Because many insurance policies cover more than one year. But they may only claim the amount for one year at a time.
Therefore if the policy is for three years, they must divide that policy in three, then remember to include it for the next two years as well.
By understanding that rental income is considered personal income. People who have rental properties. Have a large number of expenses that they can claim on their personal tax return.
And by understanding this. Can help them keep the expenses organized. So that they will be able to minimize the taxes that they pay at the end of the year. That will help them maintain those properties in future years.
Many people who have properties that they rent out have questions about the rental income as well as expenses according to Edmonton bookkeeping. Many property owners want to be able to claim these expenses personally. The they can minimize the taxes that they pay at the end of the year.
According to the Fraser Institute, the average Canadian pays approximately forty-three in taxes. Including income tax, CPP and EI. It also includes taxes such as GST and fuel tax just to name a few.
And since Canada revenue agency considers the rental income as personal income. The expenses can be deducted from the property owners personal taxes. That will allow them to demise the taxes that they pay.
For example, Edmonton bookkeeping says that property owners may be able to deduct management and administrative fees. If they have had to hire a property manager or a property management company. That manages the property on behalf of the property owner.
Such as collecting rent, finding tenants, and maintaining the property. However, if the property is being managed by the property owner themselves. They cannot deduct their own time for this duty.
Another question that many property owners have for Edmonton bookkeeping. Is if they can deduct their office expenses. And while the answer to this question is yes. Only some office expenses are allowed by Canada revenue agency.
Ultimately, anything that is not considered a capital expenditure can be included. And what Canada revenue agency considers a capital expenditure. Is anything that has a longer useful life of one year.
Therefore, a property owner may be able to claim things like pens, paper, Staples and paperclips. They will not be able to claim things like desks, filing cabinets or even calculators.
Another question that property owners will have when they do their personal taxes for the first time. Is if they are going to be able to deduct the property taxes of their rental properties on their personal taxes.
They are able to deduct the property taxes for their rental properties. For the entire time that those properties have been available for rent. Therefore if the property owner was living them for a portion of the year. Or if the property was vacant in order to do renovations. They would have to avoid submitting the property taxes it for they time that it was not available for rent.
Even the travel expenses can be used if the property owner needed to travel to get to their property. For collecting rent, supervising repairs or managing the property according to Canada revenue agency. But the only expenses that they can claim for travel are the mileage and the cost of fuel.
Therefore meals and accommodations are not included. If the property owner had to stay overnight, or eat their meals away from home.
By understanding what expenses are deductible in their personal tax return. Can help ensure that property owners are claiming as many expenses as they can sit is Edmonton bookkeeping. So that they can minimize their taxes as much as possible.