For Landlords

3 Factors to Reduce Your Rental Income Tax

Want to reduce your rental income tax? Going through tax season can be quite the trouble, especially for yourself as a landlord. Having to declare your income, especially the money you make from your property’s rent can cause you some heartache after needing to pay for it. Want to make your property more profitable for you? Here are 3 factors to consider to reduce your rental income tax. 

Understanding Tax Deductions

The first factor to reduce your rental income tax is understanding tax deductions. Tax deductions, especially for landlords such as yourself, refer to the expenses that you can deduct from your rental income. This, in turn, reduces your taxable income! 

Some common deductions may include:

  • Mortgage interest
  • Property taxes
  • Insurance premiums
  • Maintenance and repairs
  • Utilities
  • Depreciation, and
  • Property management fees

These deductions can serve as a valuable tool for you to offset your rental income, and thus lower your tax burden. 

Maximising Tax Deductions

The second factor to reduce your rental income tax is maximising tax deductions. To do this effectively, you ought to adopt strategies such as:

  1. Keeping meticulous records of all rental-related expenses; and
  2. Explore and add on available and relevant deductions.

With organised records, this ensures you can accurately claim deductions when you file during tax season. You should also consider all the possible avenues that would help lighten your tax burden such as investments for property upgrades and improvements, which grant great benefits in the long run.

This leads to the next factor…

Adhere to Malaysian Regulations

Source: The Star

The third factor to reduce your rental income tax is to adhere to Malaysian regulations. As a landlord in Malaysia, you’d do best to read up on LHDN rules and regulations regarding filing your rental income. According to LHDN, some other deductible expenses from rental income include: 

  • Assessment tax
  • Quit rent
  • Interest on home loan
  • Fire insurance premium
  • Expenses incurred on rent collection
  • Expenses incurred on rent renewal
  • Expenses on repairs and property maintenance

On the other hand, here are expenses that are not deductible:

  • Property advertisement costs
  • Legal costs for preparing the rental agreement
  • Stamp duty
  • Property agent commission


These are called “initial expenses” which are deemed not deductible under LHDN.


For Example

Let’s consider an example of how a landlord in Malaysia would reduce his rental income tax. Mr. Tan is a landlord who rents out his property in Johor and has also rental property in Penang. He diligently tracked his rental property expenses from these two properties throughout the year. By accurately documenting expenses such as property repairs, insurance premiums, and property management fees, Mr. Tan was able to claim substantial deductions during tax filing season with LHDN. As a result, he significantly reduced his taxable rental income and increased his overall investment returns.


Conclusion

To conclude, it’s important for you to understand the role tax deductions play when it comes down to maximising your rental investment benefits. With understanding and leveraging the available deductible expenses, you can be sure to minimise tax liabilities and enhance your profitability! Of course, as Malaysian landlords, you also ought to familarise yourself with relevant regulations set by the tax authority, LHDN. With careful planning and strategic deductions, you can optimise your investment returns and achieve long-term financial success!

Ready to maximize your investment benefits as a landlord? Rent out your property with SPEEDHOME today, and check out our Tax Genie feature on the SPEEDHOME app!

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