With the 2014 tax filing deadline just around the corner (April 30, 2015 the deadline has now been extended to May 5 for individuals and June 15, 2015 for self-employed persons), remember to report last year’s income from rental properties that you may have. But don’t forget to deduct all the 2014 expenses associated with this rental property so you can reduce your overall taxable income.
The following is a list of expenses that you can write off against your rental income:
- Interest portion of your mortgage paid for the year 2014
- 2014 property taxes & utility costs (water bills from the City, BC Hydro)
- 2014 maintenance costs (strata fees, cleaning, re-painting, fixing appliances, any repairs)
- Any 2014 property management fees
- Any advertising costs spent in 2014 to find a tenant
- Rental property insurance premiums
Imagine you earned an annual 2014 salary of $65,000 and a rental income of $15,000 from a 1 bedroom condominium in Burnaby. In the eyes of the government, you have earned a total of $80,000 for the year and owe about $17,680 in taxes. However, if you deduct your rental expenses (see example in chart) from your income, you can save about $4,350 in taxes.
Writing off rental expenses against your income also applies if you rent out a portion of your house or your laneway home. For example, if your house is 2000 square feet and you rent out your 800 square foot basement, you can deduct 40% of the applicable expenses.
Be sure to receive all necessary paperwork from your mortgage specialist, insurance representative and property manager, and hire an accountant to perform the detailed calculations and submit your tax return. Overall, owning a rental property or renting out a portion of your home can be a great way of building up equity while reducing your taxes.
Disclaimer: Numbers used within the example are fictitious and based on averages or rounded to the nearest dollar. Please contact your accountant to verify your own personal calculations.
