It’s a good idea to keep track of your income and expenses for all items, for example in Excel, so that you can more easily fill out a tax return and, if necessary, also presents the information to the taxpayer. The income and expenses of each investment must always be reported separately, so your own notes will make it much easier to file a tax return. At the same time, you will be better able to keep track of the activities of your investment homes. If you haven’t built such a follow-up yet, compiling it afterwards can be a bit tedious, but it’s sure to save you time in the long run.
Be sure to report all of your rental income
In addition to the rent, rental income includes all payments you receive from the tenant, such as a water fee, a sauna shift or a parking space. In addition, for example, any reminders you may charge, interest on arrears, contractual penalties, or fees withheld from security are considered rental income. Be sure to only report your share of rental income if you are investing in flats with someone.
Be sure to deduct all expenses
Tax deductions are an integral part of landlord taxation, which may seem obvious to some home investors. However, many landlords fail to make several deductions. The list of deductible expenses is long, but in general you can deduct all income-generating expenses from your rental income. Such expenses include, for example, Maintenance Fee, recognized financial consideration, loan interest and loan management costs, water, electricity, and heating costs, insurance premiums, annual repair costs, brokers’ fees, rental notifications, credit review fees, and travel expenses for the home. If you invest in housing with someone, be sure to deduct only your own share of the cost.
- In addition, you can deduct from capital income other income-generating costs that are not directly attributable to an individual item. For example, you can reduce home investment-focused literature, and possibly also telephone and computer costs, if you have more than one home. You can read more about the article on tax deductions for rental income and on the Tax Administration page.
Consider the tax year of the rental income
Rental income is taxed as income for the year in which the rent was paid to you. Thus, for example, if the tenant has not paid his December 2016 rent late until January 2019, that rental income will not be taken into account until 2020 taxation. Here the tax return estimate are useful to a great extent.
Review and, if necessary, correct the uses of the loans
Banks may incorrectly report your investment loan to the taxpayer as a mortgage or other loan, in which case interest rate deductions will not go right. For example, in 2016 taxation, 55% of the interest on a mortgage can be deducted, while the interest on a loan taken for income can be deducted in full. Therefore, always check that the purpose of your loan has been named correctly and correct any incorrectly marked loans in the Tax return online service or in the “Interest income” section of the pre-filled tax return.
It is also good to remember that interest is not deducted from gross rental income with consideration and other expenses, but separately in its own section.