Taxing Rental Income: Rent Ledgers, Allowable Expenses, Depreciation, Interest & Loss Carry-Forward

What you'll build

What you will be able to do

Each lab ends with a concrete result that you build yourself and the checker confirms, cell by cell.

• Turn Mira's 2026 rent ledger into taxable rental income: rent per flat with SUMIFS, the deposit she kept, the total income without the refundable deposit, and the vacancy rate.
• Classify Mira's twelve expenses with a category table: allowable now, capital (to be depreciated) or not allowable, then total each group and decide a repair-vs-improvement case.
• Split costs that serve both letting and private life: the cabin's letting share of used days, its allowable costs by basis, the let share of Linden Court's floor area and the allowable part of the shared building costs.
• Depreciate the building, the new kitchen, the cabin furnishings and the loft design fees at fictional straight-line rates, leave the land out, pro-rate assets bought during the year and build a five-year schedule.
• Split Mira's loan payments into interest and principal quarter by quarter, total the year's interest and apply a fictional interest cap to see how much interest she can deduct.
• Continue Mira's multi-year loss table: losses from the first two years are carried forward and used against later profits, limited by a fictional cap of 60% of each year's profit.
• Calculate the tax with a fictional bracket table: the marginal rate, the tax on all income, the tax without the rental profit and the effective rate the rental profit really pays.
• Model a possible sale of Linden Court under fictional rules: the adjusted cost after depreciation, the gain, the tax on recaptured depreciation and on the rest of the gain, and a chart of the yearly rental results.