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Tax liabilities for rental income

In recent years, property investment has continued to grow for the purpose of renting it. The course is mainly smaller apartments near city centers, which are found by some young people who prefer housing rent for various reasons. Passive income in the form of rent is certainly favorable, but what is the tax burden?

The advantage of rental income is also a lower tax burden than income from employment or self-employment. No social insurance or health insurance is payable from rental income under Section 9 of the Income Tax Act. "Rental income is subject only to personal income tax, but it is not subject to 7% of the solidarity tax at above-standard amounts, as only solidarity taxes are subject to income above the employment and business limit," adds FINFOCUS.

Forget the tax deduction

From the tax base it is possible to deduct, among other things, the interest paid on the mortgage loan during 2017, but the condition is that the loan is solved by the own housing needs. This is not fulfilled at lease. If a real estate is leased to a mortgage, then it is not possible to reduce the tax base on interest paid on a home loan.

Ideal retirement provision

In the future, the state pension will decrease due to demographic and economic trends. Regular rental income can be an important financial resource in retirement. Pensioners are not limited to income and may have a high rental income. Even early retirees. In the case of early retirement, the income from which social insurance is deductible can not be earned until reaching the normal retirement age. This condition satisfies rental income. "Given the noticeable reduction in early retirement, investing in real estate for renting is an interesting financial step for people planning early retirement," explains Emil Broz.

How do you meet your tax obligations?

People with rental income must file a tax return for 2017. Employer with rental income could make an annual employer's tax deduction only if the employee, beyond the income from employment, does not have a rental income for the whole year 2017 of more than CZK 6,000. However, only income is considered, regardless of expenditure. In the case of rental income, you need to fill out an attachment number two of your tax return. Employees must request a taxable income receipt from their employer to complete the tax return.

Actual spending or flat rate?

Expenditure can be applied in real terms or 30% of the flat rate. When using the flat rate, it is necessary to count on the fact that no extra expenditure can be applied in excess of the flat rate. For the calendar year 2017, lump-sum spending can be used up to a maximum of CZK 2,000,000, and 2018 for a maximum of CZK 1,000,000. "In the yearly rental income of CZK 1,500,000, it is possible to use expenditures of CZK 450,000 using the flat rate for 2017, in 2018 it will be only 300,000 CZK for the same income", concludes Emil Brož.

Source: tz, edited editorially

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