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In case the gross rental income from the office exceeds the
declaration limit, the whole income should be declared. The
expenses would be deducted from the amount in question
using one of the methods of lump-sum expense or actual
expense, depending on the income recipient’s preference in
order to reach the tax base.
The taxes withheld within the year by the tenant may be
deducted from the income tax calculated, according to the
income tax tariff over the mentioned amount.
On the other hand, we would also like to remind you that
the rent of the real estate rented as an office to taxpayers
deriving business profits taxed under the simple procedure is
not subjected to income tax withholding by these taxpayers.
The declaration limit for such rental incomes that are not
subject to tax withholding or exemption application is TL
1.580. All office rental incomes exceeding this amount in
2016 (that are not subject to withholding tax) need to be
declared.
C. In cases where office and house rental incomes are
combined
If rent is received both from a residential property and an
office, first of all, whether the house rent will be declared
should be checked. Accordingly, if the house rents collected
in 2016 by taxpayers in the scope of the exemption exceed
TL 3.800, the income exceeding this amount should be
declared.
If the total gross amount of the rental income from office
that is subjected to withholding and residential rental income
exceeding the exemption exceeds the declaration limit of TL
30.000, the office rental income should also be included in
this declaration. On the other hand, if the total amount is
less than TL 30.000, only residential rental income shall be
declared and office rental income shall not be included in this
declaration.
In case a tax return is submitted due to rental incomes
exceeding the exemption or declaration limit above, one
of the methods of lump-sum or actual expense would be
selected to calculate the net revenue, depending on the
income recipient’s preference and tax would be calculated
over this amount according to the income tax tariff.
When office rental incomes are declared, taxes withheld
throughout the year by the tenant would be deducted from
the tax calculated on the tax return.
D. Expenses to be deducted from rental income
Expenses that may be taken into account in the
determination of the declared rental income can be
determined using two different methods, which are “lump
sum expense” and “actual expense” methods. Taxpayers may
choose the method they prefer.
1. Lump-sum expense method
In this method, 25% of the rent can be deducted directly
as expense. If the income is partly exempt (for example,
TL 3.800 of residential rental incomes is exempt from
Mart 2017
income tax for the year 2016), the exemption should first
be deducted from the rent amount and the 25% lump-sum
expense should be deducted from the remaining income.
Since there are no exempt amounts for rents received from
offices, 25% of the rent should be deducted as lump-sum
expense and the remaining amount should be declared.
It should be taken into account that those who select this
method may not revert to the actual expense method before
2 years.
2. Actual expense method
In the actual expense method, expenses that are listed in the
article 74 of the Income Tax Law and that must be based on
documents are deductible.
However, since TL 3.800 of the revenue is exempt from tax
in case of residential rental income, the part of the expenses
corresponding only to the taxable gains should be calculated
and deducted from the income.
Information regarding expenses deductible in the actual
expense method is brought to your attention below:
a. Loan interests
If the real estate acquired with a loan is rented, the interests
paid for the loan can be deducted from the rent income
derived. As a matter of fact, if the loan interests exceed the
rent income, this amount is deemed as surplus expense,
which means that this part, which cannot be deducted
from the rent income, can be deducted from other incomes
declared.
b. 5% of the house purchase price
5 % of a real estate purchase price as a residence can be
deducted as expense for 5 years as of the year of acquisition.
However, if the expense calculated in this way exceeds
the rent income derived, the exceeding part may not be
deducted from other incomes or carried forward to following
years.
c. Rent of houses occupied
Another actual expense item on the other hand is the rent
paid by those who rent the houses they own and pay rent
for another house they live in. The part of these rents
corresponding to the non-exempt gains can be deducted
from the revenue in accordance with the actual expense
method. However, as explained above, if the expense exceeds
the rent income, the exceeding part may not be deducted
from other incomes or carried forward to following years.
d. Thermal insulation expenditures
Expenditures intended to ensure thermal insulation and
energy saving which provides a feature of increasing the
real estate’s economical value made by the leaser may
be deducted from rental income. On the other hand, in
the circumstance that these expenditures exceed the
amortization limit (TL 900) in a single calendar year,
considering them as a cost is also possible.
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