Tax Question - Capital Losses

yatest5 · Post by **yatest5** » Tue Sep 16, 2014 5:53 pm

Hi!

I rent out an apartment in Finland, and last year was a bad year (roof fell in) so I made a capital loss on the property, which I reported to Vero.

The question I hope you can help me with is..... are Capital Losses 'useful' ? Can I use them in future e.g. against future gains from rental or sale of the apartment?

Thankyou!

Tom

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harryc · Post by **harryc** » Tue Sep 16, 2014 6:03 pm

You seem to imply that you still have the apartment -?

The costs of repair can be deducted from the rent that you collected in calculating capital gains - I would think you had the apartment insured and you had a successful claim - so I'm wondering how that fits into the calculation. (someone else on that one?)

If you had a net loss during the year of the accident - that loss can be carried over for 3 years against the rent I believe - but there is the question of insurance payments I believe.

If there was a depreciation of actual value of the place and you sell it at a loss - that loss can be used for 3 years(?) on other capital gains.

yatest5 · Post by **yatest5** » Tue Sep 16, 2014 6:18 pm

Thanks, so it seems I can use the loss against future profits. I will verify with Vero

The loss was carefully calculated and reported, don't worry

harryc · Post by **harryc** » Tue Sep 16, 2014 6:32 pm

The loss was carefully calculated and reported, don't worry

What loss? Income from rent less repair costs? That could go either way of course.

What about the insurance payment which you surely got - how does that work re taxes?

yatest5 · Post by **yatest5** » Tue Sep 16, 2014 6:35 pm

I lost money because I could not rent the apartment whilst it was being repaired, which was not covered by the insurance.

Any loss which was covered by an insurance payment wouldn't be a loss, so wouldn't be reported

yatest5 · Post by **yatest5** » Tue Sep 16, 2014 6:35 pm

Incidentally, if anyone knows good landlord insurance in Finland which WOULD cover me for rental losses if this happened again, would like to know

harryc · Post by **harryc** » Tue Sep 16, 2014 7:03 pm

Any loss which was covered by an insurance payment wouldn't be a loss, so wouldn't be reported

The insurance payment would almost certainly be either higher or lower than the actual repair cost so would enter into any calculation of the net result.

You may have reported the repair cost but do you see it on your RETURNED tax report from Vero confirming the repair cost in the capital loss category?

You say 'apartment' - that implies it was a 'kerrostalo' of some sort. Walls and ceilings are considered to be part of the 'house as a whole' and covered by the 'house company' unless there has been some clear negligence on part of the apartment owner.

??

Rosamunda · Post by **Rosamunda** » Tue Sep 16, 2014 7:42 pm

If the insurance covered the repairs then you have no extraordinary expenses in that period. You still have to declare the rent that you received (unless the apartment was being repaired during the whole year) so maybe you received 6 months rent instead of 12. But it is still taxable income.

As far as I know, loss of income per se is not tax deductible. You just pay less tax, because you have less income. You don't get tax relief simply because your apartment is standing empty. If you have made a real loss in cash terms (expenses for the period were higher than actual rent received) then that can be carried forwards.

If the rental is managed by an agent, they will guarantee your rent.

Upphew · Post by **Upphew** » Tue Sep 16, 2014 7:47 pm

yatest5 wrote:Incidentally, if anyone knows good landlord insurance in Finland which WOULD cover me for rental losses if this happened again, would like to know

Probably the same company that would cover the case Microsoft decides not to pay dividends.

harryc · Post by **harryc** » Tue Sep 16, 2014 9:45 pm

If the insurance covered the repairs then you have no extraordinary expenses in that period

The OP said it was not insured - but they didn't anyhow seem to understand that insurance would be in the picture depending on whether all the repair costs were covered. In any case i wonder about the real situation because if it is an 'apartment/flat' - and the fault was structural (ceiling) the building insurance covers that unless there were extenuating circumstances caused by the apartment/flat owner.

As for agents covering lost rent, I believe that is an exceptional case and contract. I was in on MANY rentals and the agents were only glad when a renter left as they had a new 'hunt (and commission) on the way.

There may be companies (agents) now offering such guarantees but the fees will be at a whole different level.

betelgeuse · Post by **betelgeuse** » Tue Sep 16, 2014 10:46 pm

harryc wrote: If you had a net loss during the year of the accident - that loss can be carried over for 3 years against the rent I believe - but there is the question of insurance payments I believe.

Ten years

http://www.vero.fi/fi-FI/Syventavat_ver ... tap(26855)

harryc wrote: If there was a depreciation of actual value of the place and you sell it at a loss - that loss can be used for 3 years(?) on other capital gains.

The loss can only be carried over to future profits from the same capital income source.

Rosamunda · Post by **Rosamunda** » Tue Sep 16, 2014 11:15 pm

harryc wrote:
As for agents covering lost rent, I believe that is an exceptional case and contract. I was in on MANY rentals and the agents were only glad when a renter left as they had a new 'hunt (and commission) on the way. There may be companies (agents) now offering such guarantees but the fees will be at a whole different level.

Yes, they are higher but they also guarantee unpaid rents which is something I would definitely pay the extra for as I have better things to do than collect debts in my spare time.

At least when we were looking for a flat in Tampere for one of our kids we found an agent http://www.vuokraturva.fi/for-landlords ... g-services who seemed to offer some guarantees for landlords.

By the way, the OP only said that the loss of rental income was not insured. He did not say anything about the insurance of the roof (which would be a housing committee issue in most cases).

harryc · Post by **harryc** » Tue Sep 16, 2014 11:17 pm

that loss can be used

That's why I say 'used'

But I believe that losses from one 'source' can be used against profits from another source - there shouldn't be a specificity - one has ONE 'capital' account - at least that's what I have heard and done - with no protest from Vero.

Rosamunda · Post by **Rosamunda** » Tue Sep 16, 2014 11:21 pm

But, a reduction in year-on-year rental income is not a loss. AFAIK Vero works on a cash basis. If there was no loss in cash terms (ie roof repairs cost more than rental income for the period) then there is no carry forward. You can't carry lost rental income against future profits. Can you?

harryc · Post by **harryc** » Tue Sep 16, 2014 11:24 pm

Yes, they are higher but they also guarantee unpaid rents which is something I would definitely pay the extra for as I have better things to do than collect debts in my spare time.

Sure that's a good thing and one can weigh what the risk is worth. As someone who spent a lot of time trying to collect debts and find new renters, I have been thinking tthat some agent company should go one step further and make a contract where it is also there job to find the new renter. They would have a natural incentive as their 'guarantee' of paying unpaid rents would be alleviated if they could terminate the old and get a new renter in asap - that has sounded like a good business model to me but I don't know of anyone using it - and finding the new renter would be a job 'right up their alley.'

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