Q&A: What can be deducted from rental income?

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Answering a reader's question about deductions for rental income is PricewaterhouseCoopers Taxation Services Sdn Bhd (PwC) senior executive director Margaret Lee.

Lee holds a portfolio of clients from diversified industries. She has been with PwC for 20 years, and has been involved in the undertaking of corporate restructuring of companies, cross-border deal structuring, due diligence reviews and negotiations with the regulatory authorities on tax matters. Additionally, she advises clients on the income tax, real property gains tax and stamp duty implications of merger of multinationals, conglomerates, trading and manufacturing companies.

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Dear Editor,

I've rented my condo and would like to know if these are deductible:
- Real Estate Agent's commission
- Sinking fund (imposed by condo management)
- Service charges for repairs (in addition to costs of repairs)
- Installation costs of air-cond and water heater requested by tenant

Thank you.

Regards,
Sharon

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Dear Sharon,

My answers are as below:

- Real Estate Agent's commission
Answer: This is deductible, provided that this is not the first time the condo is rented out to generate rental income.

- Sinking fund (imposed by condo management)
Answer: Deductible, since this is an expense in connection with the production of rental income.

- Service charges for repairs (in addition to costs of repairs)
Answer: Deductible, as long as these are not capital expenditure but are revenue deduction incurred for the wear and tear of the premises.

- Installation costs of air-cond and water heater requested by tenant
Answer: Not deductible and not qualified for capital allowance (tax depreciation) since there is capital expenditure incurred by the landlord and the landlord is not carrying a rental business.