In the taxation of rental income, the net amount of the income obtained is determined in two different ways as follows:
- Actual expenses method
- Lump sum expenses method (for other than those who lease rights)
The selection of the actual expenses or lump sum method should cover all immovable property, which means that it is not possible to choose the actual expenses method for some part and the lump sum expenses method for the remaining part.
Deduction of Expenses in the Lump Sum Expenses Method
If the actual expenses method is chosen, following actual expenses can be deducted from the gross amount of rental income:
- Lighting, heating, water and elevator expenses paid by lessor for rented property,
- Management costs which are measured according to the importance of property and related with the administration of the rented property,
- Insurance expenses relating to the rented property and rights,
- Interest of debts relating to the rented property and rights,
- 5% of acquisition value of one rented house for 5 years beginning from the date of acquisition (This deduction applies only to rental income of the rented house; non-deductible part is not evaluated as expenditure surplus. This deduction is not valid for houses acquired before 2014), Deduction of 5% of the acquisition value applies only to one real property rented as house.
For real properties rented as workplace, such expense deduction is not applicable. - Taxes, duties and fees paid for the rented property and rights and rates paid to municipalities for expenses by lessor,
- Depreciation setting aside for rented property and rights, and heat insulation and energy saving expenditures which are made by the lessor and that increase the economic value of the real estate. (These expenditures can be considered as cost if it exceeds 1000 TL for the year 2018.)
- Repair and maintenance expenses incurred by lessor for the rented property,
- Rents and other actual expenses paid by sub-lessors, Rent of the house accommodated by the lessors who rent their own property, (non-deductible part is not evaluated as expenditure surplus), It is not allowed for taxpayers not residing in Turkey, (including Turkish nationals who reside abroad more than a continuous period of six months with residence or work permit) to deduct the amount of rents they pay in a foreign country from their rental income obtained in Turkey.
- Cost of loss, detriments and compensations paid for rented property and rights based on a contract, law or court decree.
Calculation of deductible expenses in case of exception in actual expenses method
Where a taxpayer chooses the actual expenses method and benefits from the exception applied to rental income from house, the amount of actual expenses corresponding to exception is not deductible from gross revenue.
The deductible amount is calculated as follows:
Deductible expenses = Total Expenses x Taxable Revenue
Total Value
(*) Taxable Revenue = Total Revenue – Exception for Rental Income from House
Example: Taxpayer (C) rented her house in 2018 and obtained 38.000 TL of rental income. Taxpayer, who has no any other income, incurred 9.500 TL of expenditure for his property and choses the actual expenses method.
The amount that taxpayer can deduct as actual expenses will be the amount that corresponds to the taxable revenue of the total expense for 9.500 TL.
Source: gib.gov.tr
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