Deemed vs Actual Expenses: Which Should Singapore Landlords Choose?

When filing your rental income tax in Singapore, IRAS gives you a choice: claim a flat 15% of your gross rent as "deemed expenses," or itemise and claim your actual expenses. The right choice can save you a meaningful amount of tax — and the wrong one can cost you.

Here is how each method works, when to use which, and what most landlords get wrong.

How Deemed Expenses Work

The deemed expense method is the simpler option. IRAS automatically pre-fills 15% of your gross rental income as deductible expenses in your tax form. You do not need to list individual expenses or provide receipts for the items covered by this 15%.

But here is the part many landlords miss: mortgage interest can be claimed on top of the 15% deemed expenses. This means your total deduction under the deemed method is:

Total Deduction = 15% of Gross Rent + Mortgage Interest

The 15% is meant to cover all other operating expenses — property tax, maintenance, repairs, agent fees, insurance, and so on. You just cannot claim those individually on top of it.

Record-Keeping Under Deemed Expenses

One of the biggest advantages of the deemed method is reduced paperwork. You only need to keep:

Mortgage interest statements from your bank (for 5 years)

You do not need receipts for property tax, repairs, agent commissions, insurance, or any other operating expenses. IRAS simply accepts the 15% figure.

How Actual Expenses Work

Under the actual expense method, you add up every deductible expense you incurred during the year and claim the total. Allowable expenses include:

Property tax
Mortgage interest
Maintenance and repairs
Agent commissions
Fire and property insurance
Utilities (if landlord pays)
Property management fees

Your total deduction is the sum of all these actual costs. There is no cap, but every claim must be backed by documentation.

Record-Keeping Under Actual Expenses

This is where it gets heavier. You must retain all supporting documents for at least 5 years from the Year of Assessment. This includes:

Tenancy agreements
Bank statements showing mortgage interest
Every invoice and receipt for claimed expenses
Agent commission receipts
Insurance policy documents
Property tax notices
Utility bills

If IRAS requests verification, you need to produce these documents. No receipt means no deduction.

Worked Example: When Deemed Expenses Win

Scenario: You rent out a condo at $4,000/month. Your annual mortgage interest is $14,000. Your actual operating expenses for the year are $5,500.

| Method | Calculation | Total Deduction | |--------|------------|-----------------| | Deemed | 15% × $48,000 + $14,000 interest | $7,200 + $14,000 = $21,200 | | Actual | $5,500 expenses + $14,000 interest | $19,500 |

Deemed expenses save you $1,700 in deductions. Since your actual operating expenses ($5,500) are less than 15% of gross rent ($7,200), the deemed method gives you a higher total deduction.

Worked Example: When Actual Expenses Win

Scenario: Same condo at $4,000/month, same $14,000 mortgage interest. But this year you had a major aircon replacement ($3,800), plumbing repairs ($1,200), repainting ($2,500), and normal expenses ($4,000).

| Method | Calculation | Total Deduction | |--------|------------|-----------------| | Deemed | 15% × $48,000 + $14,000 interest | $7,200 + $14,000 = $21,200 | | Actual | $11,500 expenses + $14,000 interest | $25,500 |

Actual expenses save you $4,300 in deductions. Your actual operating expenses ($11,500) significantly exceed 15% of gross rent ($7,200), making the actual method far better.

The Decision Framework

The choice comes down to one comparison:

Are your actual operating expenses (excluding mortgage interest) greater or less than 15% of your gross annual rent?

| Situation | Better Method | |-----------|---------------| | Actual expenses < 15% of gross rent | Deemed (15%) | | Actual expenses > 15% of gross rent | Actual | | Actual expenses ≈ 15% of gross rent | Deemed (simpler paperwork) | | You had a major repair year | Likely Actual | | Quiet year with minimal maintenance | Likely Deemed | | You do not keep detailed records | Deemed (by necessity) |

For a property renting at $4,000/month, the 15% threshold is $7,200/year. If your non-interest expenses are below this, deemed wins. Above it, actual wins.

The Multi-Property Rule

If you own multiple rental properties, there is a critical rule:

You must use the same method (deemed or actual) across ALL your rental properties for the same Year of Assessment.

You cannot claim deemed expenses on one property and actual expenses on another in the same year. However, you can switch methods from one year to the next.

This means if one property had an expensive repair year but your others were quiet, you need to calculate the aggregate — would deemed or actual give you a higher total deduction across all properties combined?

Can You Switch Every Year?

Yes. IRAS allows you to change between deemed and actual expenses from year to year. This gives you flexibility:

In a quiet year with minimal repairs: use deemed
In a year with major maintenance or repairs: switch to actual
Next year if things calm down: switch back to deemed

The key is to assess your situation each year before filing, not to assume one method is always better.

Common Mistakes

Mistake 1: Forgetting mortgage interest is separate under deemed expenses. Some landlords think 15% is the total deduction. It is not — mortgage interest is claimed on top. This makes the deemed method more generous than it first appears.

Mistake 2: Choosing actual expenses without keeping receipts. If you claim actual expenses but cannot produce documentation when IRAS asks, those deductions will be disallowed. If you are not disciplined about record-keeping, the deemed method is safer.

Mistake 3: Not reassessing each year. Your expense profile changes. A year with a major repair might favour actual expenses, while the following year might favour deemed. Do the calculation annually.

Mistake 4: Using different methods for different properties. This is not allowed within the same Year of Assessment. All properties must use the same method.

Which Method Do Most Landlords Use?

In practice, many Singapore landlords default to the 15% deemed expense method because of its simplicity. IRAS pre-fills this amount, and the reduced record-keeping burden is appealing — especially for landlords managing multiple properties through agents.

However, landlords who keep organised records of their expenses are in a position to compare both methods each year and choose the one that results in a higher deduction. The effort of maintaining records pays for itself when a high-expense year makes actual expenses the better choice.

Key Takeaways

Deemed expenses = 15% of gross rent + mortgage interest (simple, less paperwork)
Actual expenses = all itemised deductible costs including mortgage interest (potentially higher deduction)
Compare your actual operating costs against 15% of gross rent each year to decide
You must use the same method across all properties in the same year
You can switch methods from year to year
Mortgage interest is always deductible regardless of which method you choose