Property Investment Tax Benefits 2019 (With Tax Deductions Checklist)

Property investment tax benefits are far from the only reason to invest in property, but they are one of the key financial levers for property investors. “I am not evading taxes in any way, form or shape. Obviously, I am minimising my tax. Anybody in this national country would you not minimise his taxes wants his head read.

Therefore, tax optimisation is a critical area for property traders to master in order to ensure you take benefit of all the tax advantages to which you’re entitled. In this specific article, we’ll explore the major taxes advantages of property and how savvy traders can optimise their taxes. How important are taxes benefits to your current property plan?

Very, as the following visual illustrates. Financial modelling tools such as PIA software includes an investment property tax calculator that illustrates how much the taxman is adding to the holding costs of your investment property. It’s not unusual to see scenarios where the buyer is only funding a small small percentage of the house, with the taxman and the tenant financing the rest.

In the example here, the taxman is contributing 24% of the overall holding costs, leaving the trader to make only 14% of the full total costs. Investment Property Tax Deductions Checklist: What MAY I Claim? Just like a little business, property traders can declare a taxes deduction on expenditures incurred in the course of their investment activity.

Prepaid loan interest: you can also declare a deduction on interest you’ve pre-paid up to a year in advance. This can be a useful way to bring a tax deduction forward in to the current tax calendar year if you have a particularly high-earning 12 months that pushes you in to the next tax bracket. Repairs and maintenance: specifically, the expense of work undertaken to remedy flaws in, damage to or deterioration of the house.

For example, maintenance such as repairing electric home appliances or changing storm damaged roofer or guttering. Examples of maintenance deductions are things that will prevent future deterioration or address existing issues, such as painting the interior and exterior, or keeping the plumbing in good order. These are distinctive from capital expenditures (i.e. a restoration) – which must be depreciated – see below.

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Important note re: declaring a taxes deduction on loan interest: if you use some of your loan for any private purpose, such as buying a new car, you can state interest on that part of the loan. For this good reason, loan structuring is paramount to ensure you keep investment expenses and private expenditures clearly separated. There are two types of repairs and maintenance: those treated as an annual expense, and the ones treated as a capital expenditure.

Likewise, improvements such as renovating the kitchen or bathroom are treated as capital expenses that may be claimed over quite a few years by means of depreciation deductions. Buying and selling expenses cannot be claimed on your annual tax return. The same pertains to any initial repairs undertaken on the house. They are treated as part of the purchase costs effectively. The good news is: while you can’t claim the above items on your annual tax return, you CAN claim these expenses when calculating Capital Gains Tax (CGT) when selling the house in future. So you don’t lose out on this specific investment property taxes benefit: you merely have to wait a little longer.

There are also a few local rental investment related legal expenses that may be claimed at the end of financial yr. And merely to complicate matters further, home loan related costs such as loan establishment fees can be stated over five years generally. Depreciation is one of the very most powerful property investment tax benefits available.

Depreciation is an expense that may be claimed over a number of years. You can certainly do this with both fittings and buildings and accessories. Capital works expenditure claims are generally spread over the life of your investment, with deductions permitted on dwellings where construction commenced after 17th July 1985, where in fact the property can be used to create rental income. Further deductions can apply to structural improvements designed to parts of the house, apart from the building, february 1992 for just about any work commenced after 26. For example construction of fences or retaining walls. For investment properties acquired after 17 May 1997, the amount must reduce the cost foundation of depreciation you have claimed since buying the property.