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Buying low cost property for rental...whats your take?
Rank: Elder Joined: 12/7/2012 Posts: 11,908
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KulaRaha wrote:Mucene wrote:Gordon Gekko wrote:30% taxes on rental income....... That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries. I am a resident, and will deduct interest as an expense. I think where GG is coming from at 156k per month, regardless of what expenses and deductions you create/come up with, it is highly that you will be at the upper bracket of taxation. In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Member Joined: 1/13/2014 Posts: 386 Location: Denmark
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Angelica _ann wrote:KulaRaha wrote:Mucene wrote:Gordon Gekko wrote:30% taxes on rental income....... That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries. I am a resident, and will deduct interest as an expense. I think where GG is coming from at 156k per month, regardless of what expenses and deductions you create/come up with, it is highly that you will be at the upper bracket of taxation. ofcos the rental income will be at the 30% bracket since am sure other incomes eg employment income will have covered the other part of the graduated scale. Seeing is believing
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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KulaRaha wrote:Mucene wrote:Gordon Gekko wrote:30% taxes on rental income....... That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries. I am a resident, and will deduct interest as an expense. You need to be smart about it, for an individual mortgage relief on interest expenses is a maximum of ksh 150,000 per year, which is certainly a lot less than interest payments for a ksh 20M mortgage. You can get round this by forming a company to own the property.
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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I have incorporated an SPV just for this. The bank has been given comfort via a guarantee from me. Business opportunities are like buses,there's always another one coming
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Rank: Elder Joined: 12/7/2012 Posts: 11,908
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So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership! In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Member Joined: 1/13/2014 Posts: 386 Location: Denmark
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Angelica _ann wrote:So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership! Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions. Seeing is believing
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Rank: Elder Joined: 12/7/2012 Posts: 11,908
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jawgey wrote:Angelica _ann wrote:So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership! Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions. Kindly expound ... simple language? In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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Angelica _ann wrote:jawgey wrote:Angelica _ann wrote:So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership! Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions. Kindly expound ... simple language? At its simplest: You build (not buy) a block with ksh 1 million Your income from the block is 200,000 per year Your tax is 30% of 200,000 = 60,000 Capital deductions per year is 1 million/40 = ksh 25,000 Your tax, if you claim capital deduction is 30% of 175,000 = 52,500 So, you save ksh 7, 500 tax (60,000 - 52,500) each year for 40 years terms and conditions apply.
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Rank: Elder Joined: 12/7/2012 Posts: 11,908
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^thanks! In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: New-farer Joined: 5/30/2013 Posts: 56 Location: Mini Apple
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dunkang wrote:a4architect.com wrote:@kendata26, how are you arriving at returns of 3% for the 28m cost? Am not @Kendata26 but i can help explain. Assuming that you bought the property for KES 20M. Also, assuming your rental income for 15 years is KES 28M. Now, the gross profit for the entire 15 years is KES 8M. That is, KES 0.533M annually. This translates to 2.67% annually (on gross rental income). Pole for missing in action. Weather in my hood has finally turned so I've been outside enjoying it! @Dunkang explained it well. Assuming the cost of the unit goes up, the returns will be better than this and make the price reasonable (i'm assuming the price of buildings appreciates similar to plots in Nairobi).
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Rank: New-farer Joined: 5/30/2013 Posts: 56 Location: Mini Apple
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Gordon Gekko wrote:KulaRaha wrote:Mucene wrote:Gordon Gekko wrote:30% taxes on rental income....... That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries. I am a resident, and will deduct interest as an expense. You need to be smart about it, for an individual mortgage relief on interest expenses is a maximum of ksh 150,000 per year, which is certainly a lot less than interest payments for a ksh 20M mortgage. You can get round this by forming a company to own the property. So you form a company and reduce your income by upping your "expenses" to reduce the taxable income. Arethere specific entitites that are not allowed to own property?
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Rank: New-farer Joined: 5/30/2013 Posts: 56 Location: Mini Apple
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Gordon Gekko wrote:KulaRaha wrote:Mucene wrote:Gordon Gekko wrote:30% taxes on rental income....... That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries. I am a resident, and will deduct interest as an expense. You need to be smart about it, for an individual mortgage relief on interest expenses is a maximum of ksh 150,000 per year, which is certainly a lot less than interest payments for a ksh 20M mortgage. You can get round this by forming a company to own the property. So you form a company and reduce your income by upping your "expenses" to reduce the taxable income. Arethere specific entitites that are not allowed to own property?
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Rank: Member Joined: 3/10/2008 Posts: 301 Location: Abu Dhabi
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Gordon Gekko wrote:Angelica _ann wrote:jawgey wrote:Angelica _ann wrote:So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership! Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions. Kindly expound ... simple language? At its simplest: You build (not buy) a block with ksh 1 million Your income from the block is 200,000 per year Your tax is 30% of 200,000 = 60,000 Capital deductions per year is 1 million/40 = ksh 25,000 Your tax, if you claim capital deduction is 30% of 175,000 = 52,500 So, you save ksh 7, 500 tax (60,000 - 52,500) each year for 40 years terms and conditions apply. Do residential buildings qualify for capital deduction? Thought its only manufacturing entities.
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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@tonicasert Depreciation is an allowable expense.
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Rank: Member Joined: 1/13/2014 Posts: 386 Location: Denmark
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tonicasert wrote:Gordon Gekko wrote:Angelica _ann wrote:jawgey wrote:Angelica _ann wrote:So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership! Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions. Kindly expound ... simple language? At its simplest: You build (not buy) a block with ksh 1 million Your income from the block is 200,000 per year Your tax is 30% of 200,000 = 60,000 Capital deductions per year is 1 million/40 = ksh 25,000 Your tax, if you claim capital deduction is 30% of 175,000 = 52,500 So, you save ksh 7, 500 tax (60,000 - 52,500) each year for 40 years terms and conditions apply. Do residential buildings qualify for capital deduction? Thought its only manufacturing entities. Yes they do currently at 20% of building cost .. Basing it as a commercial building. Seeing is believing
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Rank: Elder Joined: 2/16/2007 Posts: 2,114
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Gordon Gekko wrote:@tonicasert Depreciation is an allowable expense. Forgive my ignorance..what is depreciating in this case?
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Rank: Member Joined: 8/4/2012 Posts: 155 Location: Kenya
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tonicasert wrote:Gordon Gekko wrote:Angelica _ann wrote:jawgey wrote:Angelica _ann wrote:So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership! Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions. Kindly expound ... simple language? At its simplest: You build (not buy) a block with ksh 1 million Your income from the block is 200,000 per year Your tax is 30% of 200,000 = 60,000 Capital deductions per year is 1 million/40 = ksh 25,000 Your tax, if you claim capital deduction is 30% of 175,000 = 52,500 So, you save ksh 7, 500 tax (60,000 - 52,500) each year for 40 years terms and conditions apply. Do residential buildings qualify for capital deduction? Thought its only manufacturing entities. They actually do qualifying for capital deductions as an industrial building. According to the second schedule of the Income Tax Act, the following is part of the definition of an industrial building: "a building in use rental residential building where such building is constructed in a planned development area approved by the Minister for the time being responsible for matters relating to housing" If you don't want to go to plan B have a good plan A.
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Rank: Member Joined: 8/4/2012 Posts: 155 Location: Kenya
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Chaka wrote:Gordon Gekko wrote:@tonicasert Depreciation is an allowable expense. Forgive my ignorance..what is depreciating in this case? The Building If you don't want to go to plan B have a good plan A.
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Rank: Member Joined: 3/10/2008 Posts: 301 Location: Abu Dhabi
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Cheers, clearly my tax 101 is rusty
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Rank: Member Joined: 1/1/2010 Posts: 511 Location: kandara, Murang'a
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Forgive me but the govt doesn't see construction/purchase as costs? We need some progressive laws Foresight..
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Buying low cost property for rental...whats your take?
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