Should you declare your rental income and expenses? This is a question many property owners have to contend with. But any rent payments you receive when you rent out your property are subject to income tax and must be declared in your income tax return.
Rental income refers to the full amount of rent and related payments you receive when you rent out your property.
This includes rent of the premises, maintenance, furniture and fittings. Rental income is subject to income tax. This means that any profit or net amount left once you have added together your rental income and deducted any allowable expenses is taxable. Your property is still subject to property tax, which can be calculated by multiplying the Annual Value (AV) of the property to the applicable Property Tax Rate.
The rental deposit is generally considered as being part of your rental income. Forfeiture of the rental deposit is considered as part of your gross rent and is taxable. However, depending on the reason for the forfeiture of the rental deposit (e.g. rental deposit forfeited due to damages to property by tenant), Inland Revenue Authority of Singapore (IRAS) may consider excluding it as part of the gross rent. When filing your tax return, provide IRAS with reasons for the forfeiture of the rental deposit.
As for subletting of properties, some property owners may choose to rent out a portion of their property (e.g. a spare room while still dwelling in their home). This is called “subletting”. The rental income from subletting is taxable. Property owners are required to apportion the allowable expenses incurred based on the number of rooms rented out.
Rental income is taxable from the date it is due and payable to the property owner, and not the date of actual receipt.
For example, your tenant rented your property from Oct to Dec 2017. However, he only paid the rent for this period in Jan 2018. You need to declare the rent for Oct to Dec 2017 for the Year of Assessment (YA) 2018 as the rent was due to you in 2017.
For sole owners of property, the rental income is taxed 100% on the sole owner of the property. It does not matter whether the sole owner or a third party receives the rent. For joint owner of property, the rental income is taxed on all the joint owners based on their legal share in the property. It does not matter which party receives the rent or whether the owners paid for the property. The rental loss is also apportioned to joint owners, based on their legal share in the property.
As for rental expenses, expenses incurred solely for producing the rental income and during the period of tenancy may be claimed as tax deduction. The table below lists allowable and non-allowable rental expenses:
You are required to keep the supporting documents for at least 5 years for verification purposes.
By: Phoenix Lee/Contributor iCompareLoan
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