It must have been a gratifying moment when you signed the lease to rent out your residential property. Then… sometime later, it occurs to you that you need to pay property tax and the rental income is taxable in your income tax filing!
Don’t let this douse your enthusiasm. Claim the tax deductions that you’re entitled to and you’re on your way to enjoy your extra income. If you’re not sure what can be claimed, here are some common expenses that qualify for tax deductions:
1. Interest on housing loan
Interest paid on loan or mortgage taken to purchase the property that is rented out is tax deductible. This is perhaps one of the largest expenses you’ll incur and on a recurring basis, so make sure you remember to claim deduction on it.
2. Property tax
You can claim the property tax incurred during the rental period. But property tax incurred outside the rental period is not allowable.
3. Repairs done to your property
The rules for claims on repairs are quite strict. Only repairs done to restore the property to its original state during the rental period are deductible. Repairs that improve, add to or alter the property, initial repairs, repairs outside the rental period do not qualify for deduction.
4. Fire insurance premiums
Did you take up fire insurance to protect your rental property? If you did, you’ll be able to claim the insurance premium paid.
5. Costs for getting subsequent tenants
As a lessor, you might have incurred expenses such as agent's commission, advertising and legal expenses to secure tenants. While such expenses incurred for getting the first tenant are not deductible, you’ll be able to claim expenses for getting subsequent tenants.
In addition to the above, you might have incurred other expenses that are deductible. What’s also worth knowing is the 15% deemed rental expenses option that is going to kick in from YA 2016. Meanwhile, if you’re thinking of minimising your taxes, we can help you get the most out of the deductions and reliefs available to you. Talk to us today.
