Real estate capital income is one of the important concepts encountered by real estate owners who earn rental income in the tax processes. The extent to which income from immovable properties such as residences, workplaces, plots and plots of land will be evaluated can affect many issues, from declaration obligations to expense methods.
Therefore, it is important to know the basic rules and practices regarding the taxation of rental income. The principles regarding real estate capital income are determined within the scope of the Income Tax Law.
Real estate capital incomeis the tax legislation equivalent of income obtained from renting immovable properties or certain goods and rights. According to Article 70 of the Income Tax Law, income obtained from renting housing, workplace, land, land and some rights is evaluated within the scope of real estate capital income.
Rental income is treated separately from other income elements in the tax system and is declared and taxed under certain conditions. For this reason, knowing the scope in which income obtained from real estate is evaluated is important in terms of declaration obligations and taxation process.
Real estate capital income does not only include income from residential rentals. Income obtained from renting workplaces, lands, lands and some goods and rights specified in the legislation can also be evaluated within this scope. How these incomes will be calculated, in what cases they will be declared, and which expense methods can be applied are regulated in detail in the tax legislation.
Which Incomes Are Considered Within the Scope of Real Estate Capital Income?
According to the Income Tax Law, income obtained from renting immovable properties and some goods and rights is evaluated within the scope of real estate capital income. Although these incomes are most frequently encountered in residential and workplace rentals, the scope is not limited to these.
Housing Rental Income
Income obtained from renting out real estate used as residences is one of the most common examples of real estate capital income. Rental income from residences such as houses, flats, residences or villas is evaluated within the scope of the relevant legislation and must be declared under certain conditions. Level of rental income; It may be affected by factors such as the location of the real estate, its characteristics and the supply-demand balance in the region. For this reason, real estate area analysis studies are used as an important evaluation tool in investment properties.
Workplace Rental Income
Income obtained from renting real estate used for office, store, shop, warehouse or similar commercial purposes is also within the scope of real estate capital income. Some practices in the taxation of workplace rental income may differ from residential rental income.
Land and Land Rental Income
Income obtained from renting land, land and similar immovable properties is also considered as real estate capital income. Income obtained from real estate rented for agricultural activities, commercial uses or other purposes is evaluated within the framework of the relevant tax provisions.
How is Real Estate Capital Income Calculated?
In calculating real estate capital income, first of all, the total rental income obtained during the year is taken into account. In determining the taxable amount, exemptions, deductions and expense methods in the relevant legislation are evaluated.
Applicable exemptions and expenses are deducted from the gross rental income obtained during the calculation process, if the conditions are met. The tax base is determined on the remaining amount. For this reason, in calculating the real estate capital income, some expenses and legal regulations related to the rental income in addition to the income are also taken into account.
In the guides published by the Revenue Administration, it is stated that taxpayers can consider their expenses with one of the real expense or lump sum expense methods. Which method to use may vary depending on the income owner's preference and current conditions. Since the exemption and expense elements that can be applied in the calculation of real estate capital income may change periodically, the calculations must be made taking into account the tax legislation valid for the relevant year.
Declaration Process for Real Estate Capital Income
People who earn income from real estate capital must declare their income under certain conditions. Declaration obligation; It may vary depending on the type and amount of income obtained and the regulations in the tax legislation.
When evaluating whether rental income will be declared or not, the exemptions and declaration limits valid for the relevant year are taken into account. Therefore, it is important to follow the tax regulations that are updated every year.
Who is required to submit a declaration?
Taxpayers who earn income from real estate capital may be obliged to submit an annual income tax return if their income meets the conditions specified for the relevant year. When assessing the declaration obligation, the type, amount and manner of obtaining the income are taken into account.
The declaration obligations of full taxpayer real persons and limited taxpayers may differ in some cases. For this reason, it is necessary to determine correctly the scope in which rental income is evaluated.
In what cases is the declaration given?
The annual income tax return is submitted if the rental income meets the declaration requirements for the relevant year. If the exemption amount applied to residential rental income is exceeded or the declaration limits determined for workplace rental income are exceeded, a declaration may be required.
Whether there is an obligation to declare; It is evaluated according to the type of income, the total rental income obtained and the tax regulations valid for the relevant year. For this reason, the rules to be applied for residential and workplace rental income may differ.
What are the Expense Methods for Real Estate Capital Income?
Taxpayers who earn income from real estate capital may take certain expenses into account in the taxation of rental income. According to the regulations in the Income Tax Law, there are two different methods for calculating expenses: real expense and lump sum expense.
Which method to use may vary depending on the taxpayer's preference and income status. However, since the chosen method may have different effects on the tax base, the scope of expenses and calculation principles must be evaluated correctly.
Actual Expense Method
In the actual expense method, expenses incurred in relation to the rented real estate and allowed to be deducted in the legislation are taken into account. Insurance expenses, maintenance and repair expenses, loan interest and other expenses that meet certain conditions can be evaluated within this scope.
In this method, only expenses that are actually incurred and can be documented are taken into account. Article 74 of the Income Tax Law contains regulations regarding expenses that can be deducted under the actual expense method.
Lump Sum Method
In the lump sum expense method, a discount is applied at the rate determined in the legislation, without the need to document individual expenses. This method may be preferred by taxpayers who do not want to track their expenses in detail.
Unlike the actual expense method, actual expenses do not need to be calculated or documented separately. However, when choosing the expense method, the tax regulations and implementation principles valid for the relevant year should be taken into consideration.
What is the Difference Between Real Estate Capital Income and Commercial Earnings?
While real estate capital income refers to the income obtained from renting immovable properties or certain goods and rights; Commercial income covers the income obtained from commercial activities carried out within an organization and continuity.
For example, rental income obtained as a result of renting a house is generally considered as real estate capital income. On the other hand, if buying and selling activities are carried out within the scope of a commercial organization and on a continuous basis, the income obtained can be considered as commercial income.
Income from real estate capital generally arises from the giving up of the right to use the real estate to someone else for a certain price. In commercial income, income is obtained as a result of ongoing activities based on the provision of goods or services.
Frequently Asked Questions
Who Submits Real Estate Capital Income Declaration?
Taxpayers who meet the declaration requirements for rental income may be required to submit an annual income tax return. Declaration obligation; It is determined according to the type and amount of income and the tax regulations valid for the relevant year.
What is the difference between real expense and lump sum method?
In the actual expense method, expenses that are allowed and documented in the legislation are taken into account. In the lump sum method, discounts are applied in line with the principles determined in the relevant legislation, without calculating the expenses one by one.
Are Workplace Rental Income Considered as Real Estate Capital Income?
Income obtained from renting real estate used as a workplace is also considered within the scope of real estate capital income. However, there may be different practices in taxation and declaration processes than housing rental income.
In what cases is the precedent rent applied?
According to the statements of the Revenue Administration, in some cases, even if there is no rental income or the real estate is rented at a low price, the comparable rental price can be taken as basis. Situations in which the equivalent rental fee will be applied are separately regulated in the tax legislation.
