Something everyone with rental income runs into. The rules matter to you once a year, but getting them wrong brings a penalty that lasts.
Exemption and declaration
The part of residential rental income above the annual exemption is declared. The exemption amount is set anew each year.
The return is filed in March. Commercial rents are subject to withholding, and the rules differ from residential ones.
Methods for deducting expenses
There are two methods: lump-sum expenses and actual expenses. With the lump-sum method a set proportion of income counts as expenses; with the actual method documented spending is deducted.
Which one works out better depends on the property. Where there is loan interest on a home, the actual expense method usually comes out ahead.
Keeping the paperwork in order
Paying rent through a bank provides proof of income when you file. Keep the receipts.
If you are going to use the actual expense method, you need to keep the receipts for repairs, maintenance, insurance and service charges through the year.
More than one property
If you receive rent from more than one home the exemption is applied once, and the calculation is made on the total income.
We help you keep the lease, the bank receipts and the expense documents in order; you file the return with your accountant. This article gives general information and is not a substitute for personal tax advice.
Related sections of this guide
Terms from the glossary
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