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Own Rental Properties? Tax Deductions You'll Want to Know About

If you are an owner of rental properties, then you may qualify for various tax deductions. In Canada, there are two basic types of expenses to consider when looking to deduct from them. They include current expenses, which are operational costs that reoccur and have short-term benefits, and capital expenses, which pertain to long-term benefits.

An example of a current expense would be repairs made to a rental property to restore it back to its original condition. This expense can be deducted from one’s gross income. As for capital expenses, they may include the buying price of a rental property, the fees associated with it, as well as the cost of rented furniture. This expense is different from a current expense because the full amount cannot be generally deducted in the same year that it was incurred. Accountants who understand the difference between these types of expenses can then ensure that businesses are receiving accurate and correct financial statements.

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When it comes to tax deductions related to rental properties, they may include the cost of landscaping, condominiums, lease cancellations, and vacant land. As for the types of expenses that are deductible in addition to property taxes, they include advertising, office expenses, interest charges, bank charges, professional fees, insurance, prepaid expenses, salaries, administration fees, vehicle costs, as well as fees associated with repair and maintenance, travel, and utilities.

Advertising expenses pertain to getting the word out to potential tenants about rental properties in the first place. This may involve the distribution of advertisements through newspapers, radio stations, and television. Meanwhile, office expenses encompass items such as pens, stamps, and other stationery. It should be noted, however, that office expenses do not pertain to properties such as desks, chairs, and cabinets.
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Insurance and bank charges involve the monetary values borrowed in order to improve rental properties. As for professional fees, they refer to the expense in legal services related to collecting overdue rent, as well as accounting servicings such as bookkeeping, record audits, and the preparation of financial statements.

In terms of insurance, rental property owners may deduct premiums on an annual basis. Prepaid expenses reflect its namesake and refer to the expenses that were paid by the owner ahead of time. Meanwhile, salaries can contribute to deductions by virtue of the wages paid to maintenance employees and superintendents.

Administration fees involve those hired to search for new tenants and property managers, while vehicle costs involve the transport of materials used to repair rental properties. On that note, material and labour expenses may also be deducted, however, a rental property owner cannot deduct the value of their own labour.

In addition, deductible travel expenses refer to transportation involved for the purpose of rent collection, repair and maintenance supervision, as well as property management. As a rental property owner, if one pays for utilities such as water, electricity, and cable, then one may deduct for these expenses.

Calculating the applicable rental property tax deductions can be overwhelming for real estate owners. However, with the help of Prasad & Company LLP, one can rest assured that the calculations are done right. To request a consultation, contact the firm at either firm@prasadcpa.com or 416-226-9840.

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