To claim actual or deemed expenses on your rental income?

Did you hear that from Year of Assessment (YA) 2016, individuals who derive passive income from renting out residential properties will have a choice^ when it comes to claiming rental expenses?

It makes sense to find out as this will have an impact on your after-tax income.

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What happens is that instead of claiming your actual deductible rental expenses , you can opt to claim a deemed amount arrived at based on 15% of your gross rental income. This does not cover housing loan interest which will continue to be based on actual amount incurred.

You may find it beneficial to opt for the deemed 15% expenses if your actual deductible expenses is less than the deemed amount. But if the converse is true, you may still want to claim the actual expenses since it will amount to some tax savings.

Opting for deemed expenses has the advantage of simplifying your tax filing and reducing the burden of record keeping since you’ll not be required to keep record of those expenses.

You can make this election on a yearly basis. But once you opt for the deemed expenses treatment in a particular YA, it is to be applied across all your rented residential properties in that YA.

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Weighing up the different options will ensure that you maximise your after-tax income. And this applies to other aspects of your tax filing as well. If you can do with some help with the calculations or planning, get in touch and ask us how we can support you.

^ This option does not apply to rental income received by individuals through a partnership or from a tenanted property held under trust.