United Kingdom: Property Income Tax Rules
UK rental income is taxed as property income, part of your total income subject to progressive rates: 20% (basic rate, £12,571–£50,270), 40% (higher rate, £50,271–£125,140), 45% (additional rate, above £125,140). Property allowance: £1,000/year tax-free property income for small landlords (not available alongside rental expense deductions — choose one). Allowable expenses: letting agent fees, maintenance and repairs, insurance, council tax (if landlord-paid), utility bills (if included), accountancy fees. Mortgage interest: Since April 2020, individual landlords can no longer deduct mortgage interest directly from rental income — instead, they receive a 20% tax credit on the mortgage interest amount. Higher-rate taxpayers are significantly disadvantaged (pay 40% on gross rent, receive only 20% credit on mortgage interest). Wear and tear allowance (furnished lettings): replaced by actual replacement of domestic items relief. Non-resident landlords: 20% basic rate withholding by tenant or letting agent unless registered with HMRC Non-Resident Landlord Scheme. Capital gains on UK property: 18% (basic rate) or 24% (higher rate) from April 2024.
Australia: Negative Gearing and CGT Discount
Australia's rental income is added to total taxable income at progressive rates (up to 45% + 2% Medicare levy). Negative gearing: if rental expenses (including mortgage interest) exceed rental income, the net loss can be deducted from all other income — wages, business income, investment income. This makes gearing into an investment property attractive for high-income earners who want to reduce current tax. Capital gains tax: when selling a rental property, the capital gain is included in taxable income. The 50% CGT discount applies if the property was held for more than 12 months — effectively halving the taxable gain. Example: $200,000 gain on property held 5 years → 50% discount → $100,000 taxable at marginal rate. Non-residents: non-residents pay Australian tax on Australian-sourced rental income; the CGT discount is not available to non-residents from 9 May 2017 for assets acquired after that date. Depreciation: Australian rental property owners can claim depreciation on the building structure (2.5%/year for post-1987 buildings) and plant/equipment items.
Canada: CCA, Non-Resident Withholding & Principal Residence
Canadian rental income is ordinary income taxed at federal + provincial progressive rates (federal up to 33%; combined federal + provincial up to 53% in high-tax provinces). Deductible expenses: mortgage interest (rental portion), property taxes, insurance, maintenance, property management fees, advertising, accounting fees, vehicle expenses for property visits. Capital Cost Allowance (CCA): depreciation on rental buildings at 4%/year (Class 1) declining balance — but CCA cannot create or increase a rental loss (can only offset rental income, not other income). CCA recapture on sale: all CCA previously claimed becomes income (recapture) when the property is sold — reducing the long-term tax benefit of claiming CCA. Non-resident withholding: non-residents receiving Canadian rental income face 25% withholding tax (reduced via treaty or NR4 return election). Non-residents can elect to file a Canadian return and pay tax on net rental income instead of 25% gross withholding. Principal residence exemption: no capital gains tax on sale of your principal residence — complex designation rules for those who have multiple properties or have rented their home.
Germany: AfA Depreciation and Taxation Rules
German rental income (Einkünfte aus Vermietung und Verpachtung) is taxed at progressive rates: 0% up to €11,784 basic allowance (2024), then 14–42%, with a 45% solidarity surcharge rate above €277,826. Deductible expenses: mortgage interest (Schuldzinsen), property management fees, repair costs, insurance, council taxes (Grundsteuer), travel to inspect property, accountancy fees. Depreciation (AfA): buildings built after 1924 → 2% per year of building value (50-year straight-line). Buildings built before 1924 → 2.5%/year. New residential construction from 2023 → 3%/year under reformed rules (§7a EStG). Land value is not depreciable. Non-residents: rental income from German property is taxable in Germany for non-residents; most tax treaties allocate real property income to the country where the property is located, so German property rents are taxable in Germany. Capital gains: sales of German rental property held less than 10 years are fully taxable (Spekulationssteuer). Properties held more than 10 years: no capital gains tax for private individuals (significant long-term advantage).
Spain, Portugal, and Japan: Key Rules
Spain: rental income taxed at progressive rates for residents (19–47%). EU/EEA non-residents: 19% flat rate on net rental income. Non-EU non-residents: 24% flat rate on gross rental income (no deductions unless treaty applies). Spain allows proportional expense deductions including mortgage interest, depreciation (3% of building value/year), and maintenance. Airbnb/short-term rental income: treated as business income requiring registration in many regions. Portugal: rental income (category F) taxed at 28% flat rate for non-residents; residents can choose 28% flat rate or progressive rates. Airbnb/tourist apartments: may qualify as business income taxed differently. Portugal's NHR (Non-Habitual Resident) regime offered tax benefits on foreign-source rental income — transitioning to IFICI regime from 2024. Japan: non-resident landlords pay 20.42% withholding tax on Japanese rental income. Resident landlords: rental income added to total income and taxed at progressive rates (5–45% + 10% local inhabitant tax). Japan allows depreciation (2–47 years depending on building type), earthquake insurance premiums are deductible.