Deduction on the Rental Payments from the Rental Income in the Annual Income Tax Declaration for the Year 2024

If you earn rental income but also incur rental costs, it will be helpful to read our below note before submitting your income tax declaration for the year 2024!

We briefly explain the details regarding the conditions required for the deduction of the rental payments for those who opt to use actual cost basis instead of the lump sum basis.

After deducting the exemption amount from the gross amount of your rental income, if any, according to Article 21 of the Income Tax Code, you can compute the income tax base by deducting the expenses stated under Article 74 of the said Code. Those who benefit from the exemption should calculate the amount of expenses corresponding to the exemption, which is not allowed for deduction.

The Article details the list of expenses to be deducted in 11 subparagraphs respectively. The common feature of the expenses is that they are paid by the lessor and are related to the leased real estate. If the real estate is partially rented out, only the expenses corresponding to this part will be deducted.

One of these expenses is the rental cost of the residence, which is rented out by those who rent out the residences they own in subparagraph 10.

In the determination of the amount of rental cost that can be deducted as an expense, attention should be paid to the issues summarized below:

1. The owned immovable must be rented as a residence.

2. There is a limit for deduction. After deducting all other expenses stated under Article 74 of the Income Tax Code, the rental cost is deducted over the remaining amount, if any. The part that cannot be deducted is not considered as an excess expense, is not declared as a loss and is not subject to deduction in the following years.

3. Expenses do not have to be paid in order to be deducted from the rental income. Although the accrual basis is valid for the deduction of expenses, it must be documented and the documents must be kept for 5 years. It is possible to deduct the rent collected from the real estate rented out as a residence (within the scope of the collection basis), even if the rent of the residence is not paid. However, if the rental income is not collected from the rented residence, no deduction can be made. The rent that cannot be deducted in the relevant year cannot be deducted in the event that the rent is collected from the rented residence in the following years.

4. If there is more than one property rented out as a residence, the rental income of the rented residence is deducted from the income of the whole.

5. The rent to be deducted from rental income is only the rent paid for the residence. Pursuant to Article 19 of the Turkish Civil Code, in line with the principle of ‘uniqueness of the place of residence’, there is a single residential address (domicile) in the ‘Address Registration System’, which is matched with the identification number of the person. Housing rent expense paid, if any, related to the residential address in the system can be deducted.

6. The rent for the residence rented for your children cannot be deducted.

7. Places such as hotels, nursing homes and care homes for the elderly, etc. are not considered as a residence with rent and the amounts paid cannot be deducted.

8. Rent paid for the residence of the spouse cannot be deducted.

9. Regarding the deductibility of the house rent paid abroad, the law does not specify whether the house in question is rented domestically or abroad. However, it is understood that the approach of the Turkish Revenue Administration is based on the distinction between full and limited taxpayers. In the explanations given in the General Communiqué No. 210 of the Income Tax Code, it is stated in Article 2 of the Income Tax Code that individuals who are resident in Türkiye and Turkish citizens who are affiliated to official departments and institutions or organizations and undertakings headquartered in Türkiye and reside in foreign countries due to the affairs of these institutions will be considered as full taxpayers. The persons other than these will be considered as limited taxpayers. Turkish citizens who live abroad for more than six months by obtaining a work or residence permit will be considered as limited taxpayers. In the Guidelines on the Declaration of Rental Income issued by the Turkish Revenue Administration, it is stated that the rent paid abroad by limited taxpayers cannot be deducted.

10. On the other hand, it is also understood that the general view of the Turkish Revenue Administration is that the housing rental costs of Turkish full taxpayers in foreign countries cannot be deducted from their housing rental income derived in Türkiye, despite the fact that no such classification is addressed in the said Article.