If you’re a property owner in Malaysia earning rental income, you might be wondering: “What expenses can I deduct? How do I calculate my taxable rental income? And where do I even start?” Filing taxes for rental income can feel overwhelming, but don’t worry—we’ve got you covered.
In this guide, we’ll break down everything you need to know about filing your taxes for rental income in Malaysia. From deductible expenses to step-by-step calculations, we’ll make it simple and easy to understand. Let’s dive in!
What Counts as Rental Income?
First things first: rental income refers to any money you earn from letting out your property. Whether it’s a residential unit, commercial space, or even a room in your home, if you’re receiving rent, it’s considered rental income and must be declared to the Inland Revenue Board (LHDN).
What Expenses Can You Deduct?
Not all expenses related to your rental property are tax-deductible. Here’s a breakdown of what you can and cannot deduct:
Deductible Expenses
- Mortgage Interest
Only the interest portion of your mortgage payment is deductible. You can find this amount on your loan statement. - Maintenance Fees and Sinking Fund
These are the monthly fees you pay to your property management office. For example, if your maintenance fee is RM200 and your sinking fund is RM20 (10% of the maintenance fee), the total deductible amount is RM220. - Assessment Tax and Quit Rent
These are annual taxes paid to your local council. They are fully deductible. - Fire Insurance Premium
The cost of insuring your property against fire damage is deductible. - Repairs and Maintenance
Costs for repairs (e.g., fixing a leaky faucet or repainting walls) are deductible. However, these must be minor repairs—not major renovations. - Expenses for Tenancy Renewal
If you incur costs to prepare your property for a new tenant (e.g., cleaning or minor repairs), these are deductible. - Property Management Fees
If you hire a property manager or agent to handle rent collection or maintenance, their fees are deductible.
Non-Deductible Expenses
- Expenses to Secure Your First Tenant
Costs like agent commissions, advertising, or renovations to make the property rentable are not deductible. These are considered “start-up” expenses. - Major Renovations
If you renovate your property to attract tenants (e.g., fully furnishing a bare unit), these costs are not deductible.
How to Calculate Your Taxable Rental Income
Here’s a step-by-step guide to calculating your taxable rental income:
- Start with Your Gross Rental Income
Add up all the rent you received for the year. - Subtract Deductible Expenses
Deduct the allowable expenses listed above (mortgage interest, maintenance fees, repairs, etc.). - Calculate Your Net Rental Income
Your net rental income is your gross rental income minus deductible expenses. This is the amount you’ll declare to LHDN.
Example Calculation
Let’s say you own a property and earned RM30,000 in rental income for the year. Here’s how you might calculate your taxable rental income:
- Gross Rental Income: RM30,000
- Deductible Expenses:
- Mortgage Interest: RM18,000
- Maintenance Fees + Sinking Fund: RM2,640
- Assessment Tax + Quit Rent: RM1,200
- Repairs: RM500
- Fire Insurance: RM300
- Property Management Fees: RM1,200
- Total Deductible Expenses: RM23,840
- Net Rental Income: RM30,000 – RM23,840 = RM6,160
In this example, you would declare RM6,160 as your taxable rental income.
Where to Declare Your Rental Income
If you’re an employee, you’ll declare your rental income in Borang BE under the section “Pendapatan Berkanun Lain” (Other Statutory Income). Simply input your net rental income (e.g., RM6,160 from the example above) into the appropriate box.
Pro Tips for Property Owners
- Keep Detailed Records
Maintain a file with all your rental income and expense records, including receipts, invoices, and bank statements. - Use a Spreadsheet
Create an Excel sheet to track your monthly rental income and expenses. This will make tax filing much easier. - Consult a Tax Agent
If you’re unsure about any aspect of your taxes, seek advice from a qualified tax agent. Their fees are also tax-deductible! - Stay Updated on LHDN Guidelines
LHDN occasionally updates its rules and regulations. Download their official circulars to stay informed.
Final Thoughts
Filing taxes for rental income doesn’t have to be complicated. By understanding what expenses are deductible and keeping accurate records, you can ensure compliance with LHDN while maximizing your tax savings.
If you found this guide helpful, share it with fellow property owners! And for more tips on property investment and management, visit Chat Property Malaysia.
