If you are a property investor, tax time could be little confusing to you. If you are looking for the right advice to understand how to Claim Depreciation on Investment Property to reduce your tax liability reasonably, here are some tips to help you:
1. Figure Out What You Claim:
A variety of expense-related deductions are entitled to claim by investors including repairs, interest, fees, depreciation, and maintenance. A property depreciation report is a significant aspect to consider for the depreciation for tax purposes.
Typical depreciation schedules for rental property maintain all the deductions pertaining to capital works such as floors, roof, wall, windows, doors, etc inclusive of removable plant & equipment that belong to such a building. It also includes various appliances, blinds, carpets, etc.
2. Depreciation Rules:
The depreciation for tax purposes is available for the legal owners. In case of hire and purchase agreements, notional sales of goods are considered and the legal owner can claim the deduction. Similarly, in the case of joint ownership, no individual partner can claim the entire depreciation.
These deductions are limited to the extent to which you use your rental property for generating income. If you are using the 50% of the property, you cannot claim 100% depreciation for that particular year.
3. Age of the Property:
Most of the investors mistakenly believe that their property is too old to claim depreciation benefits. The age of a property does significantly impact on the capital work deductions but the depreciation claimed on the plant & equipment is regardless of the property’s age and can save a considerable tax amount.
4. Work From Home Also Allows a Depreciation Deduction:
Are you operating from home? If yes, you are also entitled to claim for the portion of property including the involved plant & equipment for the purpose of depreciation claims. A quantity surveyor can guide you in differentiating all the items which can be included in property depreciation report.
5. Depreciation for Tax Purposes Can Be Claimed for Partial Financial Years:
Even if you have purchased any rental property towards the end of the financial year, you can include it in the property depreciation report on a partial basis. If a large sum of money is involved in any such investment, it will lead to boost your cash flow significantly.
6. Crosscheck Your Tax Return:
If you are not acquiring the adequate knowledge on how to Claim Depreciation on Investment Property, you are prone to make errors pertaining to asset classification and calculation of depreciation. The plant & equipment depreciation rate is higher than capital works. So, if you maintain depreciation schedules for rental property at the same rate for both the classifications, you are tending to lose a significant depreciation claim.
7. Consider a Qualified Quantity Surveyor:
The selected professional specializes in helping with depreciation schedules for rental property is considered as the Qualified Quantity Surveyor under Tax Ruling 97/25. If you are not sure about how to Claim Depreciation on Investment Property, you can refer such professionals to seek an extended guidance. You can check with your accountant for any such referral to find an appropriate surveyor. Remember, not all the quantity surveyor possess specialization in building depreciation.
It is important to maximize your depreciation claims in order to ensure a higher return on investment on your rental property. You can also be assured a money-back guarantee on the services offered by the reputed quantity surveyor. But, most of these professionals also charge a premium service fee.
If you are an amateur investor, it is recommended to seek an experienced quantity surveyor to maintain your depreciation schedules for rental property more accurately and efficiently.