There are deductions for rental income allowed by the government. This post will discuss the top fifteen tax deductions for rental income so that the rental income owners can pay the correct amount of income tax for their rental business.
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In the principle of tax fairness, taxable income earners are expected to pay only the correct amount of tax. The Income Tax Act allows a deduction of expenditure incurred towards generating taxable income.
Therefore, to establish the correct amount of income tax to pay, the expenses incurred towards the income generation are deductible.
Landlords
Landlords earn rental income in the rental business. The income may come from their own rental premises or from rented premises that the landlords are subletting. Rental income is one of the sources of income subject to income tax. Hence, to determine the correct amount of tax to pay, every landlord has the right to deduct the expenditure incurred in generating the income.
Only landlords paying rental income tax under standard Income tax provisions can claim expenditure towards generating taxable income. Taxpayers who pay tax under the minimum rental income provisions at the current tax rate of 10% do not claim any expenditure.
Rental income tax is due from all rented properties unless expressly exempted in the Income-tax Act. Some of the income that attracts rental income tax includes income from the rental of residential houses and buildings, commercial houses and buildings, and other properties.
Many landlords spend money operating the business of rental properties. However, many landlords pay more taxes on their rental income than they should. Many landlords do not deduct expenses incurred in generating rental income.
There are reasons landlords do not deduct expenses incurred to generate rental income. For example, the landlord does not know that the tax law allows them to deduct expenses when establishing taxable rental income.
The following are seven tax deductions discussed in this post that every landlord must consider when determining the amount of income tax to pay on rental income.
1. Landlord salary
Every service provided towards the generation of taxable income should be accounted for and paid for. However, many landlords offer services to generate rental income and do not charge for them. It remains a mystery why many landlords are sufficiently philanthropic to forgo charging for the services they provide in their rental business. A landlord’s salary is tax-deductible.
2. Employees Compensation
No business can operate without employees. Some rental businesses have several permanent and temporary employees. Expenses are incurred for both permanent and temporary employees. The expenses are salaries, wages, or allowances paid to any person providing employment services for the rental business. The expenses are deducted as rental business expenses
Tax Deduction 3. Training expenses​
Landlords and their employees may attend training, seminars, and conferences to improve business skills. Attendance at training, seminars, and conferences may be in person or online. In addition, the attendance may also be local or away in another town.
Tax Deduction 4. Professional services
Landlords engage a lot of professional services to generate rental income. Some of the professional services procured by landlords for the rental business are legal services, accounting services, etc.
5. Transport costs
Landlords travel to their rental properties to address several issues. Landlords are entitled to a tax deduction for travel expenses incurred for their rental business.
For example, when the landlords travel to sort out a tenant complaint, attend a meeting, inspect the properties, or go to hardware stores to purchase supplies for repairs to the rental properties, they incur transport costs.
6. Office Expenses
Many landlords have rental business offices, either at home or elsewhere. There are expenses incurred to operate the rental business offices. The landlords have a right to deduct office expenses from their taxable income.
The deduction applies to the office space and any workshops or other home workstations from which the rental business is operated. Some of the expenses incurred in an office for rental income include rent for the space, office stationery, internet bills, and other expenses.
Tax Deduction 7. Interest expenses
Many landlords take out loans for their rental properties and pay interest on them. Landlords borrow loans and pay interest in three instances: interest on loans to build rental properties, and mortgage interest on loans used to acquire, renovate, or modify rental properties.
Conclusion
Note that these are not the only expenses. There are many other expenses. Did you learn anything new? Implement what you have learnt.
This post was on tax deductions for rental income.
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Dr. Wakaguyu
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