For property owners in Singapore, understanding how rental income is taxed is crucial to optimising tax liabilities. The Inland Revenue Authority of Singapore (IRAS) allows landlords to choose between claiming actual rental expenses or a 15% deemed expense deduction. This guide explains both options in detail so you can make an informed decision.
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🏠 What Counts as Rental Income?
Rental income includes payments received for the use of your property, whether residential, commercial, or industrial. This includes:
- Monthly rent payments
- Non-refundable deposits
- Payments for furniture, fittings, or maintenance
💰 Option 1: Actual Rental Expenses
Under this method, you can deduct the actual expenses incurred in earning rental income, provided they are directly related to the rental activity and supported by records.
Examples of deductible expenses:
- Property tax
- Mortgage interest (only the interest portion)
- Repairs and maintenance
- Agent commissions for securing tenants
- Fire insurance premiums
- MCST service and conservancy charges
You must keep receipts, invoices, and statements as proof for at least 5 years.
📊 Option 2: 15% Deemed Expense Deduction
To simplify the process, IRAS allows landlords to deduct a flat 15% of gross rental income as deemed expenses, without needing to track each cost.
On top of the 15% deduction, you can still claim the mortgage interest separately if applicable.
📈 Which Method Should You Choose?
| Criteria | Actual Expenses | 15% Deemed Expenses |
|---|---|---|
| Record-Keeping | Must keep all receipts and invoices | No need for detailed receipts (except mortgage interest) |
| Deduction Amount | Varies depending on actual costs | Fixed at 15% of rental income |
| Best For | Landlords with high rental-related expenses | Landlords with low rental-related expenses |
📌 Example Calculation
Scenario:
Gross rental income: S$30,000 per year
Mortgage interest: S$6,000
Using Actual Expenses (Total actual expenses S$8,500):
Taxable income = S$30,000 – S$8,500 = S$21,500
Using 15% Deemed Expenses:
Deemed expenses = 15% × S$30,000 = S$4,500
Taxable income = S$30,000 – S$4,500 – S$6,000 = S$19,500
In this example, the 15% deemed method gives a lower taxable income.
📝 How to Declare in Your Tax Return
- Declare gross rental income in your Form B/B1
- Choose either “Actual Expenses” or “15% Deemed Expenses” in the rental schedule
- Submit supporting documents if requested by IRAS
⚠️ Important Reminders
- Once chosen, the deduction method applies for the entire YA
- You cannot combine both methods in the same YA for the same property
- Mortgage principal repayments are not deductible
💡 Tax Planning Tip
Before filing, compare both methods to determine which results in a lower taxable rental income. If your rental property is newly renovated or has high maintenance costs, the actual expenses method might be more beneficial. Otherwise, the 15% deemed deduction can save time and paperwork.
📍 Final Thoughts
Understanding the difference between actual expenses and the 15% deemed expense deduction is key to smart rental income tax planning in Singapore. Whether you’re a first-time landlord or an experienced property investor, choosing the right method can help you maximise savings and stay compliant with IRAS requirements.
