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Old Bob | Do I need to open a business bank account if i want to rent a property out? |
I'm in the process of buyng a flat to let out, but am unsure of how best to keep finances of the venture clear. I am not intending buying any more properties, just the one to act as a back-up to my pension |
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MeMe N Only Me
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No you dont need to open a business bank account.
Just a normal Current account will do.
Business account is for established businesses |
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wwinegarden
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legally no, but you will have to keep very good records for income tax purposes |
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bassmonkey1969
 |
No, you can put the rental income into a regular bank account. |
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pagreen1966
|
No of course you don't.
However, you will need to keep copies of your bank statements along with any other documentation connected with renting out your property, such as mortgage statements, repair bills, letting agency invoices, as these items will all be needed when you come to fill in your tax return.
PS. Ignore 'Ian R' above when he states that you can offset your mortgage repayments against your rental income. This is complete rubbish. What you can offset against the rental income is mortgage interest payments along with other items such as repair costs, house insurance costs and letting agency fees. |
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newmexicorealestateforms
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Well Old Bob the tax ramification of the extra income should be a concern and records should be maintained to prove your income and expenses how you do that is really up to you some choose an additional account because it's easy to show money in and money out and in most cases now those types of accounts are free at the local lending institutions. Here are some interesting links regarding those issues if you are in the US
IRS: 3.6 Itemized Deductions/Standard Deductions: 6. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses): http://www.irs.gov/faqs/faq3-6.html
IRS: Residential Real Estate Rental deductions: http://www.irs.gov/publications/p527/index.html
IRS: Time to keep records: http://www.irs.gov/businesses/small/article/0,,id=98513,00.html
IRS: Deductible costs when purchasing real property:
http://www.irs.gov/publications/p551/ar02.html#d0e2000
SOCIAL SECURITY: Receiving special payments (income) after you retire for work done before you started getting your social security:
http://www.socialsecurity.gov/pubs/10063.html
If you're not in the US then just get an account
Buena Suerte |
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John Corey
|
The regulations for the deposit will vary by the country if not the state. The UK is rolling out a deposit scheme where the funds can not be held by the landlord or they have to buy insurance.
The need to have a separate account is not legal as much as practical. You want very clear records. You can do this by using your own personal account and then documenting everything. Or you can keep the funds separate so there is no confusion. With Quicken and similar programs keeping accurate records is not hard.
Some investors do not want their checking account (current account in the UK) visible to the tenants. By having a separate account they can minimize the information that is visible and keep the funds in the account minimized if there was a legal claim (up to a point).
You do not need a business bank account. You likely do not have a business registered (with Company House) so you could not open a business bank account.
Record keeping is the key. If you are very well organized then the books and records will do the trick. |
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amsterdam
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No. Avoid business accounts, they are expensive and unnecessary. I've been a landlord of several properties for years; my tenants pay into my First Direct Savings Account - no problem. I pay property related bills from the First Direct current account. This is quite separate from my other, personal account, which I hold with another bank, and helps me keep things clear when doing the annual accounts. I pay myself a modest sum monthly from the FD account, and save what I don't need for bills, tax, etc. |
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TaxMaven
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No, just open a separate bank account in your own name & run all income & expenses related to the rental property "business" through that account. This will give you a nice, clean check register that you can easily use to help you (a) figure out if your venture is profitable & (b) file an appropriate, accurate tax return. Plus, you will have good records in case you ever get audited. |
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skintbanker
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You should read the banks terms and conditions where you are thinking of opening an account. I suppose it depends on whether the bank deems the account that you open (if its an ordinary personal account) as being used for business purposes, as the bank can request, if this is the case, that you open a business account. If there is little turnover going through the account it's unlikely but there is still that small risk! |
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James M
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You don't need to open a business account just a separate account will do. What you must do is inform the inland revenue as you will in cure tax. To offset the amount of tax you pay keep all receipts for work done on the property and employ an accountant |
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ian r
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You dont need a business account. You can use your ordinery bank account. You need to declare the income from the flat for tax purposes, however the income can be offset by the mortgage you have on the flat. So you end up payin tax on only your profit on rent (if any). |
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Michael B
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you might just for the Deposit. Some states require this and if your tennent moves out and tears up the place they could still get there deposit back if you don't have there deposit in a seperate account. |
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