Owning a property, while a good investment, can also be heavy on the taxes. However, only a few people know that much of it can be claimed as tax-deductible or as depreciated items. But how much and what exactly can be claimed on tax? Let’s take a better look.
Knowing the Typical Tax Deductions
To begin with, you must keep receipts of all your expenses on your property investment. Next, you should identify all the things that can be claimed for tax deductions. For land owners in Australia, there are a significant number of costs that fall under this:
- Loan interest and fees for any ongoing loan. Both of these are usually included in the loan statement and can be directly used for deductions.
- Land tax and council rates are tax-deductible. Body corporate fees for villas, apartments and townhouses alike are also usually tax-deductible.
- Insurance for both the building and the landlord is tax-deductible.
- Bookkeeping and account fees are also tax-deductible.
- Miscellaneous costs like traveling costs to property, stationery items, phone cost, advertising for tenants, ongoing property management fees and re-letting costs are also usually tax-deductible.
Careful with the repairs
Repairs are a tricky field when it comes to tax deductions. The nature and extent of repairs usually decide whether it is tax-deductible, but it is murky waters. Ongoing maintenance operations like gardening and pest control are generally included under tax deductions. Repair of objects within the property, like a faulty water heater, might be claimed under tax deductions (though you would need to check the specifics beforehand).
When you replace an item within your property altogether, legally it no longer remains a ‘repair’ and becomes instead an ‘improvement’. Any such improvements on the property cannot be claimed for tax deductions. However, such replacements are eligible for depreciation for property.
Using depreciation for deductions
For property owners, depreciation is often the best way to get tax deductions. As mentioned before, home improvement cannot be directly deducted from tax but is eligible for depreciation. Landlords usually opt for depreciation on investment property due to the sheer range it covers, almost everything within the property – garage, kitchen floor, windows, etc. – is eligible for it. Even items used for interior decoration like carpets and curtains can be included for depreciation.
However, the range can also often get confusing. It is easy to forget what items could be applied for depreciation and what couldn’t. There are professionals like quantity surveyors that can thoroughly examine everything on your property and prepare a depreciation schedule for investment pro.
Having a professional Deppro contact number in your pocket might come in handy! For instance, all of the legal costs involved in buying a property are not eligible for tax deductions. Instead of this, costs like stamp duty and legal fees can be used to reduce your capital gains tax when you sell the property in the future.
Property investments can be a costly affair, thanks to the huge taxes they incur. But if you are smart enough, you can legally save a lot of money on tax claims.