Real estate investment is attractive because of its stable income, but as income increases, so does tax.Income from profits earned from real estate is also determined by the Income Tax Act as real estate income and must be paid correctly.This time, I will explain the tax on the rental income obtained from real estate investment and how to calculate it.
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Scope of real estate income based on income tax law
According to the National Tax Agency, the Income Tax Law divides income into 10 categories.
reference:https://www.nta.go.jp/taxes/shiraberu/taxanswer/shotoku/1300.htm
- Interest income: Interest on deposits and savings, public and corporate bonds, and income related to distribution of profits from jointly managed trusts, public and corporate bond investment trusts, and publicly offered public and corporate bond investment trusts
- Dividend income: Income related to dividends received by shareholders and investors from corporations, investment trusts (other than public and corporate bond investment trusts and publicly offered public and corporate bond management investment trusts), and distribution of profits from specified beneficiary certificate issuing trusts
- Income from real estate: Real estate such as land and buildings, rights on real estate such as leasehold rights, income from leasing ships and aircraft
- Business income: Income from agriculture, fisheries, manufacturing, wholesale, retail, service, and other businesses
- Employment income: Income such as salaries and bonuses received from the employer
- Retirement income: Income such as retirement allowances received from the employer upon retirement and lump-sum payments based on the Employees' Pension Insurance Act that are paid due to the retirement of members of the Employees' Pension Fund, etc.
- Forestry income: Income generated by logging and transferring forests or transferring standing trees *In the case of logging or transferring within 5 years after acquiring forests, it is not forest income but business income or miscellaneous income. Become
- Transfer income: Income generated by transferring assets such as land, buildings, and golf memberships, and income from the establishment of superficies for the purpose of owning buildings, etc. *Income arising from the transfer of certain items among inventory assets such as business products, forests, and depreciable assets is not considered transfer income.
- Temporary income: Income that does not fall under any of the above 1 to 8, and is other than income generated from continuous acts for profit such as sweepstakes, lottery prizes, horse racing and bicycle race refunds, and labor Temporary income that does not have the nature of consideration for other services or the nature of consideration for the transfer of assets
- Other income: Income that does not correspond to any of the above 1 to 9 income such as public pensions
Income from real estate investment is ``3. and aircraft lending”.
Types of annual taxes on real estate income and how to calculate them
The annual taxes related to real estate investment are property tax, income tax (real estate income), and resident tax.
Property tax is a tax that occurs only by owning real estate, so income from it is not considered.Income tax and resident tax vary depending on the amount of real estate income.The calculation method of real estate income is the following formula.
Real Estate Income = Gross Income - Necessary Expenses
Total Income: Rent, key money, renewal fee, management fee, parking lot fee, income from vending machines, antenna base installation fee, etc. All income earned from real estate investment is included.Deposits and security deposits will be returned if there is no default, so they are not considered income, but if they are not returned, they must be included as income.In addition, even if these expenses are accrued, they must be accounted for on paper.Of course, you don't need to add it when you receive the money.
Necessary Expenses: Of the expenses necessary to obtain income from real estate, it is considered to be clearly distinguishable from household expenses.This includes property taxes, damage insurance premiums, depreciation, repair costs, management consignment fees and advertising costs paid to real estate companies, and interest on loans paid to financial institutions such as banks.
income tax
It is a progressive tax and the higher the income, the higher the tax rate.
- If the amount is 195 million yen or less, the tax rate is 5% and the deduction is 0 yen.
- From 195 million yen to 330 million yen, the tax rate is 10% and the deduction is 9.75 yen.
- From 330 million yen to 695 million yen, the tax rate is 20% and the deduction is 42.75 yen.
- From 695 million yen to 900 million yen, the tax rate is 23% and the deduction is 63.6 yen.
- From 900 million yen to 800 million yen, the tax rate is 33% and the deduction is 153.6 yen.
- From 1,800 million yen to 4,000 million yen, the tax rate is 40% and the deduction is 279.6 yen.
- If the amount is 4,000 million yen or more, the tax rate is 45% and the deduction amount is 479.6 yen.
As a calculation formula, if the real estate income is 600 million yen,
Real estate income of 600 million yen x tax rate of 20% - deduction amount of 42.75 yen = 77.25 yen
will beThe amount is correct, but the formula below is correct, and the deduction amount is set for easy calculation.
The calculation is a little complicated because "income tax is not taxable income x tax rate".As in the above example, if the real estate income is 600 million yen, the tax rate is 20%, so 600 million yen (20 million yen x 120%) is likely to be income tax, but the correct calculation is as follows.
(195) 5 million yen x 330% + (195) (10 million yen - 600 million yen) x 330% + (20) (XNUMX million yen - XNUMX million yen) x XNUMX%
↓
9.75 yen + 13.5 yen + 54 yen = 77.25 yen is the amount of income tax.
* In the first year after purchasing real estate, it may be possible to significantly reduce taxes by calculating various taxes and depreciation as negative amounts.
There are multiple deductions for income tax, basic deduction of 38 yen, employment income deduction for salaried workers, social insurance deduction, spouse deduction of 38 yen, dependent deduction of 38 to 63 yen, blue return deduction of 10 to 65 yen, Deduction for medical expenses, deduction for life insurance premiums, and deduction for earthquake insurance are common. there is.
Resident tax
Basically, it is 10% of the income amount, so if it is 600 million yen, it will be 60 yen.
Property tax
Once every three years, the appraisal value of the land (land area (land area) x road price = appraisal value of the land) and the current value of the house (value per point x floor area x restructuring cost per unit area) × Aging deduction correction rate) calculated by the Tokyo Metropolitan Government and each municipality.
Calculation formula: Taxable standard amount x standard tax rate (1.4%) = property tax
Tax saving effect by using real estate investment as business income
If rental income is obtained from "approximately 10 or more independent rooms" or "approximately 5 or more independent houses", it is considered to be engaged in real estate as a business and it is not real estate income but business income. This will expand the range of expenses that can be declared.You can use the blue return special deduction, you can use your home as an office and use electricity bills and part of the rent as expenses, you can use your relatives as employees and use their salaries as expenses, you can carry forward losses for 3 years, bad debts The main advantages are the ability to set reserves and the ability to record assets as expenses within 30 yen.In the case of a sole proprietor, if the taxable amount exceeds 290 yen, an individual business tax (5% for rental income) will be imposed.
When to declare income from real estate investment and what to prepare
You can do it at the tax office from February 2th to March 16th every year, or you can send it by mail as a correspondence, so let's file it within the period.
Tax offices are open from 8:30 to 17:XNUMX Monday through Friday, but may be open on some Sundays during the final tax filing period to accept consultations and return forms.
In addition, if you submit a notification of opening a business to the tax office when you start investing in real estate, it is convenient because a set of necessary documents will be sent to you when you file your tax return every year.
Documents related to rent (passbook, rental contract), certificates of necessary expenses (administration expenses, reserves for repairs, insurance, various taxes such as income tax, registration license tax, property tax, etc., stamp receipts book, loan repayment table, etc.), real estate sales contract, tax withholding slip, breakdown of real estate income and expenditure, blue return financial statement, final tax return B, etc.If you ask a tax accountant, the market price is about 5 to 10 yen.
Summary
We introduced that there are many things and taxes that must be declared when investing in real estate.Paying taxes within the period with correct knowledge is the basics of trouble-free real estate management, but there are points that save taxes in the mechanism, so it is important to use it well to increase profits.
At Rich Road Co., Ltd., we will consistently support all aspects of investment real estate, from complete beginners to experienced people, from a wide range of real estate selection, loan consultations, post-purchase management, and renovations.
