If you as a natural person own real estate you would like it to fall in Box 3, under asset management and not in Box 1 under income. Among other things, this has to do with how the tax authorities determine your assets as a real estate investor. In this blog you can read all about real estate investing and box 3.
Does my real estate fall into box 3?
For private investors who own real estate as natural persons, the basic rule is that this falls under Box 3. This must involve a normal situation. The tax authorities call this 'normal asset management'. The rent you receive is untaxed; on the other hand, you may not deduct items such as maintenance costs or interest.
What is not normal asset management?
The Internal Revenue Service lists several situations where there may be income from other income rather than normal asset management:
- leasing out a property
For example, you converted a property to create separate apartments that you sold or are going to sell. - Performing at least 30% of major maintenance or other modifications to a leased property yourself
- Using prior knowledge or other specific knowledge to gain advantage.
How can I keep my real estate in Box 3?
There is no clear guideline for when your investment property falls into Box 1 or Box 3. Incidentally replacing a light bulb can still be seen as normal asset management. But as soon as you yourself, as a real estate investor, start performing all activities involved in renting out real estate and remain actively involved in this, the tax authorities will quickly see this as profit from business or result from other activities. In that case, it will therefore be taxed in Box 1. By outsourcing the work to a property management company, you can be sure that your real estate portfolio will fall into box 3 and you will not face any surprises.
Property management by City Estate
Thanks to the unique and innovative approach of City Estate, you, as a real estate investor, are completely relieved throughout the rental process. City Estate ensures that the house is put on the market for the best possible rental price. The search for a suitable and reliable tenant, screening of candidate tenants and signing of the lease are activities that are handled by City Estate. Finally, City Estate will also take care of the daily property management. Monthly rent collections, accepting and handling repair requests and periodic inspections are matters taken up by City Estate. In short, as a real estate investor, you can enjoy a carefree return on your real estate. More information? Then contact us quickly!