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A Complete Guide to Rental Income Tax



According to the Inland Revenue Authority of Singapore (IRAS), all income earned in or derived from Singapore is subject to income tax. Income earned is defined as:

  • Income from Employment;

  • Income from Trade, Business, Profession or Vocation,

  • Income from Property or Investments

  • Other Sources of Income

Income from Property or Investments are:

  • Dividends

  • Gains from Sale of Property, Shares & Financial Instruments

  • Interest

  • Rent from property

Other sources of income are:

  • Annuity (recurring annual payments)

  • Charge (alimony and maintenance payments)

  • Estate / Trust Income

  • National Service Housing, Medical and Education Award

  • Royalty

  • Winnings (Toto, 4D...)

  • Withdrawal from Supplementary Retirement Scheme (SRS)

In this article, we will look at income tax for rent of property. According to the IRAS, 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. The taxable income will be the net amount of the total rental income after deducting allowable expenses.


Rental income is taxed on all the owner/joint owners of a property, based on their legal share in the property.


If you want to rent out your property, you need to inform the IRAS within 15 working days and pay stamp duty. If you use the IRAS digital platform to process the tenant agreement (TA), IRAS will be informed automatically, therefore, saving you the hassle of informing them. The penalty for non-compliance is a fine of up to $5,000 plus interest on the tax payable.

 

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Forms of Income Derived from Property Rental


Forfeiture of Rental Deposit


Generally, rental deposit forfeited is considered as part of your gross rent and is taxable. On a case-by-case basis, IRAS may consider excluding it as part of the gross rent, depending on the reason for forfeiture. An example could be the forfeiture of rental deposit due to damages to your property by the tenant. You have to provide the reasons when filing the tax return if you want the forfeited amount to be excluded from the gross rent received.


Subletting of Property


In the current economic slowdown, some property owners may rent out empty rooms for additional income. This practice is known as subletting. Rental income earned from subletting is also taxable. Property owners are required to apportion the allowable expenses incurred based on the number of rooms rented out when computing the tax payable.


Recovery from Insurance


If you have claimed any amount from the insurance on the property that is rented out, the amount recovered is taxable and should be reported as part of your rental income. The amount you recovered from the insurance company will be added to your gross rental income.



Date of Taxable Rental Income


Rental income is taxable from the date it is due to be paid to the property owner, and not the date when you actually receive the payment. For example, if you rented out your property from October to December 2020, but the tenant only pay you in January 2021, you have to declare the rent for Oct to Dec 2020 in the Year of Assessment (YA) 2021 as the rent was due to be paid in 2020. The rental income is taxed 100% on the owner of the property even if the rental is paid to a third party.


As you are able to deduct expenses from the gross rental payments, we look at what are the claimable expenses and how to get it deducted.



Rental Expenses


Expenses incurred solely for producing the rental income and during the period of tenancy may be claimed as tax deduction. IRAS has made it easy for property owners who lease their residential properties with the convenience of pre-filled rental expenses.


To simplify tax-filing and reduce the burden of record-keeping, an amount of deemed rental expenses calculated based on 15% of the gross rent will be pre-filled in the online tax form. In addition to the 15% deemed rental expenses, property owners can further claim the mortgage interest on the loan taken to purchase the tenanted property. Just remember to keep supporting documents of the mortgage interest for at least 5 years for verification purposes. It is however, not necessary to keep records of the other rental expenses incurred.


If property owners feel that the actual amount of rental expenses incurred is more than the 15% guideline by IRAS, they can opt to claim the actual amount. Again, just remember to retain all supporting documents such as TAs, bank mortgage statements, invoices and receipts for at least 5 years for verification purposes.



Deductable Expenses


Here are examples of expenses that can be deducted:

  1. Housing loans – Only for the interest paid on the loan taken to purchase the rental property. If the property is also for your own use, the amount will be apportioned accordingly. Not valid for repayments of the principal loan or monthly instalments and late payment penalties.

  2. Property tax – Only for property tax incurred during the rental period only, for example, property tax for year 2020 on the property rented out in 2020. You are not allowed to claim for property tax incurred outside of the rental period, penalties imposed for late payment or non-payment of property tax and for balance brought forward from previous year's property tax.

  3. Fire insurance – You can claim for the premiums paid but not on the capital sum assured on property.

  4. Repairs – Only for the cost of repairs done during the rental period to restore the property to its original state. What is not included are initial repairs before the property was rented out, repairs done which result in improvement/additions and alterations and repairs incurred outside rental period.

  5. Maintenance – Only for the cost of maintaining the property (i.e. painting, pest control, monthly maintenance charges to building management). Does not include improvement works or alterations.

  6. Costs of securing tenant – Only for agent's commission, advertising, legal expenses and stamp duties for getting subsequent tenants. You cannot claim for the cost of securing the first tenant.

  7. Cost of supervision or management fees – Only for costs incurred in engaging a third party to manage your property (i.e. rent collection/upkeep/deal with tenants’ queries). If the management fees are paid to a related party (e.g. relatives or your own company), you need to justify that the amount paid is at market rate and commensurate with the services rendered.

  8. Furniture and fittings – Only for costs incurred in replacing furnishings to their original state, and renting furniture.

  9. Internet charges/expenses – Only if you pay on behalf of the tenant and are not reimbursed by the tenant.

  10. Utility expenses – As per the Internet expenses, only if you pay on behalf of the tenant and are not reimbursed.


Filing Your Income Tax


To avoid last-minute rush and late filing penalties, the IRAS is encouraging taxpayers to file their returns early. They can do so via myTax Portal, logging in directly using the SingPass Mobile app. myTax Portal is a secured and personalised portal by the IRAS for you to view and manage your tax transactions.


For those requiring tax filing assistance, you can contact the IRAS directly through the following channels:

  • IRAS chatbot AskJamie,

  • Call 1800 356 8300 (Mondays -Fridays, 8 a.m. to 5 p.m.)

  • Email via myTax Portal

If you wish to visit the IRAS office, you are advised to make an appointment at least 2 working days in advance or you can visit the ‘Our Tampines Hub Integrated Public Service Centre’, which will be providing assistance on Income Tax e-filing (Mondays to Sundays, 9 a.m. to 10 p.m., except Public Holidays).



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