How to reduce rental income tax? - 12/25/00
Question
I am retired and own a debt free property for rent. How to reduce my rental income tax? should I used a limited company to own the property and have expenses in that company? or what do you suggest? thanks.
Answer
If you are having the sole income as from rental, and the property is in your name, you may elect for personal assessment in order to obtain personal allowances so that your tax liability would be reduced. If you use limited company, you need to pay stamp duty and legal fee on transfer of property. In addition, you also need to pay business registration fee, audit fee, annual return fee etc.. each year for maintaining a limited company. Using a limited company, all actual business expenses can be deducted under profits tax. However there is advantage in being taxed under property tax if the actual expenses are less than the 20% statutory limit. Hence, you need to calculate which one is more beneficial.