If you own a property and only use part of it for business purposes and the rest as your own residence, can you still apply for the preferential tax rate for owner-occupiers? When I sell the property in the future, can I still use the tax exemption?
The core behind these kinds of questions is the mentality that we had when we were kids and watching Justice, My Foot, when the detective Leopard Head slowly clenched his right hand into a fist and said to Bao Longxing the classic line: "I want them all!"
In the current property market, investors and owner-occupiers face many challenges and opportunities. With the acceleration of urbanization, the influx of population has led to rising housing prices, which has made many people want to maximize the benefits of their properties. Not only for living, but also to make profits through business activities. Such demand has led to a trend of diversification in the use of real estate.
In terms of real estate tax, investors need to accurately calculate the gains of each transaction. For example, if an owner carries out several renovations and alterations during the period of ownership of a property, these expenses can be deducted as costs, thereby reducing the amount of tax payable. Smart investors will consult a professional land agent before selling and make plans to achieve the best tax treatment in the shortest time.
For example, a landowner owns a piece of land on the edge of a city and initially intends to build residential buildings, but as businesses grow in the surrounding area, he decides to develop part of the land for commercial purposes. This not only allows companies to enjoy preferential treatment at different tax rates, but also improves land use efficiency and achieves financial maximization.
In terms of land tax, owners of multiple plots of land can significantly reduce taxes if they can reasonably allocate their uses. When it comes to land development and utilization, in addition to residential use, we can also consider diverse uses such as commercial development, leisure and tourism. This not only increases the value of the land, but also allows you to apply for corresponding tax incentives based on different uses.
For example, suppose an investor purchases several apartments in the city center, one of which he lives in and the others he rents out. Through meticulous tax management, investors not only enjoy low tax rates for self-occupied properties, but also obtain stable cash flow through renting out, and ultimately enjoy certain tax exemptions in their annual tax returns.
Finally, through good tax planning and flexible asset management strategies, real estate investors can achieve their financial goals one after another and gain a foothold in the future market. Such success is not only a reward for one's own efforts, but also a contribution to family and society.
Most importantly, all tax planning must be based on legality and compliance. Investors should regularly update their tax knowledge and adjust their strategies according to policy changes. Only in this way can we maintain competitiveness and achieve healthy financial development in the ever-changing market.
In addition, there are some other tips to help save taxes. For example, a couple who owns a property could consider dividing the property equally between the two of them. In this way, the tax exemptions of each of them can be used repeatedly, further reducing the tax burden. Similarly, if a family has children, they can transfer the property to their children's names and take advantage of their tax rate preferences to achieve the effect of tax reduction.
There are other factors to consider when discussing property taxes. For example, tax rates may vary from region to region, so investors who own multiple properties need to pay close attention to the tax policies in each region and make corresponding adjustments. This not only reduces unnecessary expenses, but also ensures the return on investment.
Understanding the relationship between tax and real estate is critical. For every real estate owner, mastering tax laws can not only save taxes legally, but also effectively manage their assets. Let's look at a real case: a landlord rents out part of his property and obtains stable rental income. This behavior can not only help him offset part of the mortgage, but also reduce the tax burden through reasonable tax planning. This is a good example of using the law wisely.
"I want to make money from business or rental, and I also want to pay the least tax so that I can enjoy the greatest tax savings when I sell the property in the future."
It may seem arrogant and want to have all the benefits, but this is not a pipe dream. As long as we make good use of the current laws and regulations and on the premise of "honest declaration and correct use", this ideal model actually has a chance to be realized.
We will analyze each type of tax calculation method one by one:
1. Property Tax
Taxes can be levied based on usage ratio, with separate calculations for self-occupancy and business use.
According to Article 5, Paragraph 1, Clause 3 of the Property Tax Regulations, if a property is used for both residence and non-residence (such as business, rental, etc.), different tax rates shall be applied to the actual area used:
Home use: The tax rate for owner-occupied houses applies (generally 1.2%, 1% for a single house)
Non-residential (business): applicable business tax rate (3%)
Even if the actual business area is very small, the non-residential taxable area must not be less than one-sixth of the usable area.
Example:
Ms. Wang owns a five-story townhouse. Only the first floor is used as a breakfast shop, and the rest of the floors are occupied by herself.
If the areas of the five floors are the same, the usable area of the first floor is 20%, which is more than one-sixth. The non-residential tax rate is levied according to the actual area; the remaining 80% is subject to the residential tax rate.
2. Land Value Tax
The "self-use residential land tax rate" can be applied for in proportion to the division
According to Articles 9 and 17 of the Land Tax Law, the land tax rate for self-use residential land is 2‰, which is much lower than the general land tax rate (10‰~55‰).
However, if the property is partially used for business or rental purposes, it cannot be used entirely as a "self-occupied residence" to apply for the discount.
However, as long as you can clearly distinguish between self-occupied and non-self-occupied purposes, you can apply for discounts in proportion.
Example:
Mr. Lin owns a 100-ping piece of land with a four-story house on it, with each floor covering 25 pings. Only the first floor is rented to a dental clinic, while the other three floors are occupied by himself.
75% land (self-occupied part) is subject to 2‰ land value tax
25% Land (business portion) is subject to the general tax rate (e.g. 10‰)
Remember to submit an application for self-use residential land to the tax authorities before September 22 each year, so that the preferential treatment can be applied in that year. If you fail to do so, the preferential treatment will be extended to the next year.
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3. Real estate tax
When selling in the future, tax and preferential treatment will be applied according to the usage ratio
The real estate tax system implemented since 2016 combines the transaction income of houses and land into a single tax system. As long as there is a profit, a real estate tax will be levied, that is, the selling price - the total purchase cost = the profit. If the profit is a positive number, it is subject to tax.
The most frequently mentioned one is the 4 million tax exemption. If the real estate is only partially operated or rented out, the preferential and general tax rates will be applied according to the actual proportions based on the years of holding, usage and whether it is self-occupied.
I will not list the calculations for more detailed tax treatment. Please spend a little money and let a professional land surveyor help you optimize tax saving.
Otherwise, wait until I obtain the land surveyor qualification, and then come to me to help you make the best tax saving planning.
Let me teach you another little trick. If your property is a townhouse and the business place only occupies a very small area, you can use only one floor when applying, and then divide it into 1/6 for non-self-occupied use. This way, the tax amount you declare for non-self-occupied use will be so small that you don't have to think too much about it.
"I want to run a business, live in the house, save taxes, and sell real estate in the future to maximize tax exemption!"
The above mentality is actually not a luxury. As long as the use is clearly divided, the area can be quantified, the lease or business registration documents are kept, and the tax authorities are honestly declared and applied for in a timely manner.
You will have the opportunity to realize the perfect solution of "one house for multiple uses", "legal tax savings" and "financial maximization".
After all, only children make choices. What we mature adults want is: "I want them all, and they are all legal!"
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