Landlords and real estate sellers can choose how to tax their income. While a progressive tax rate can be cheaper, a flat tax rate may be more advantageous for others. In this article, we’ll examine the pros and cons of both options.
The flat tax rate is 15% of the gross rental income for those who rent out their property. This rate is applicable regardless of the amount of income earned. If you choose this option, you do not have to keep track of your expenses or report them to the tax authorities. This is an advantage for those who do not want to spend time and effort on bookkeeping.
The progressive tax rate is based on the taxpayer’s total income. Rental income is added to other sources of income, and the total is then used to determine the applicable tax rate. The rate varies from 12% to 32%, depending on the total revenue. If you opt for this option, you must keep track of all expenses related to the property and report them to the tax authorities. This is a disadvantage for those who do not want to spend time on bookkeeping and paperwork.
When selling real estate, the flat tax rate is 15% of the difference between the sale and acquisition prices. This is also known as the “capital gains tax.” This rate is applicable regardless of the amount of income earned. If you choose this option, you do not have to keep track of your expenses or report them to the tax authorities. This is an advantage for those who do not want to spend time and effort on bookkeeping.
The progressive tax rate is also based on the taxpayer’s total income. The income from the sale of real estate is added to other sources of income, and the total is then used to determine the applicable tax rate. The rate varies from 12% to 32%, depending on the total revenue. If you opt for this option, you must keep track of all expenses related to the property and report them to the tax authorities. This is a disadvantage for those who do not want to spend time on bookkeeping and paperwork.
In conclusion, a flat tax rate is a good option for those who do not want to spend time on bookkeeping and paperwork. It is also advantageous for those earning a small income from renting or selling real estate. A progressive tax rate is a good option for those earning a significant income from renting or selling real estate. In any case, it is crucial to consider your options and choose the one that is most advantageous for your situation.