Many parents invest in property as part of the retirement planning, but do you know all of the tax deductible items related to your investment property and maintenance? If not, you might be losing thousands of dollars each year.
While most investors are aware that there are tax deductible items associated with property investment, it’s an area that is rarely understood without the help of investment property finance specialists.
Investors who don’t know the ins-and-outs of property tax could be losing thousands of dollars each year, so it pays to know what can be claimed as a tax deduction.
Here is a quick overview of some of the most common tax deductible items that all investors should be aware of.
Depreciation on plant and equipment
Items deemed ‘plant and equipment’ on your investment property are depreciable items and are tax deductible. These can typically include carpet, air-conditioning units, appliances and blinds, among other items.
Depreciation on the dwelling
In some specific circumstances, the dwelling is a depreciable asset. This is for residential buildings where construction commenced on or after July 18, 1985 or where construction of structural improvements started on or after February 27, 1992.
In some circumstance, you can deduct transportation costs, such as running a car and depreciation, as well as meals or accommodation, if the property is a long distance from your principal place of residence. This typically applies if you’re preparing the property for new tenants, collecting rent, inspecting the property and maintaining or repairing the property. It does not apply to travel expenses relating to the acquisition or sale of the property.
If you’ve incurred interest on a loan for an income producing asset (i.e. an investment property), then that interest is typically tax deductible. Even if you have used your own home as security for some or all of the loan, it is still deductible.
Property management fees
If you pay a property manager to look after your property, then the fees can be claimed as a tax deduction.
It’s easy to see that there are many items that are classed as a tax deduction on an investment property. For depreciating items, such as the dwelling or plant and equipment, it’s best to pay an independent valuer for a depreciation report, which is a tax deduction in itself.
Do you know of any other tax deductions you can make on an investment property? Share with us in the comments.