Many people lack awareness about one of the most profitable tax deductions investors use to make a purchase economical. Interest has emerged as one of the major expenses of buying an investment property. And, a large number of people are not aware that mortgage interest payments on an investment property is tax-deductible. For the benefit of investors, interest has emerged as a cost that is deductible from rental income; it can help in minimising your tax obligations. If you are planning to invest, it is ideal to gain some knowledge of property investment. You should seek the services of experts for claiming depreciation on investment property.
Below are some of the main tax deductions that you should be aware of:
1. Maintenance and repair cost:
In order to maintain your investment property, you may have to indulge in some maintenance and repair costs. There are various types of repairs and maintenance such as repairing a leaking roof or fixing a damaged tap; these costs are all tax-deductible. Your property agent’s charges and insurance will also be deductible. You can claim the costs of running your home office like electricity, internet or rent to the level you use it for investment. Your advisor’s fees, accountancy fees, and property investing subscriptions also fall in the category of tax-deductible items.
2. Loan interest:
It is noteworthy that annual interest paid on investment loans will be tax-deductible. You should asses your property investment returns with the utmost care. An experienced investor knows that interest on borrowed money for investment property is deductible. It does not matter whether the money is for stamp duty or legal fees. You only have to prove that the funds are related to the investment purchase. And, it holds true whether you borrowed the funds from a bank or from different property’s equity.
Many people frequently ignore depreciation deductions in old properties. They are under the notion that old properties lack depreciation value. However, this is not true. If you make any renovations or improvements to an older property since its construction, it can also depreciate. As your accountant won’t be able to prepare a property tax depreciation schedule, you can hire a quantity surveyor. You should use the services of an expert quantity surveyor as he can spot all depreciation available on the property.
At times some traveling undertaken for the purchase, maintenance or inspection of your investment will be eligible for a claim. You can claim by cents per kilometre for traveling undertaken to these experts or even to your own property. If you failed to claim them in the past, you will be allowed to put an earlier date. In case some confusion prevails, you can speak to an expert tax accountant.
It will turn out to be profitable for you to improve your awareness of common tax deductions. Several studies claim that younger people tend to remain unaware of the various tax deductions. Few people are aware that interest repayments are eligible for tax deductions. Some experts say that the higher prices of houses may have caused people to get less occupied in research investing. However, you should not forget to claim your tax depreciation and in case you find the calculations tricky, you may seek experts’ services.