When looking at an investment property, you may want to know what you can write off on your taxes to determine how much value the property might provide. 

Investment properties can be great for reducing tax because they come with a range of tax benefits and have the potential to earn you significant money long term.

If you’re considering a Clyde North investment property, understanding the full potential of the tax deductions available to you will help you make the most out of your investment property. 


Rental property

Renting out your investment property is a good way to generate income and can also make you eligible for several tax deductions. 

If you’re using your investment property as a rental property, there are numerous tax claims you can make, including rental insurance, utilities (if you, rather than the tenant are paying for them), pest control, and council rates (if you’re paying for them, not the tenant). 

As the owner of the property, the income received through your rental property is taxable, however, the rent must be at normal market rates to be able to claim the expenses in full. If you charge rent below the market rates, sometimes in the case of renting to family or friends, you can only claim deductions up to the amount of rent charged. 

Repairs made to your investment property during the period it is leased are deductible, though this generally does not include repairs carried out within the first 12 months of owning the property. 

If you use advertising platforms to find tenants, you may be able to claim this as a tax-deductible expense. 


Loans

A loan includes numerous charges, and some of these can be claimed for investment properties, such as loan establishment fees, account management fees, mortgage insurance fees, mortgage registration, mortgage broker fees and stamp duty (on the loan, not the property). 

Loan interest can be one of the biggest tax deductions you can claim on an investment property. If you had to take out a loan for your investment property, you are entitled to claim any interest charged on the loan as a rental property deduction, as long as all the money borrowed was used for the purchase of the property. 

The tax deduction you can claim on the loan interest of an investment property could include interest received through the mortgage on an investment property, money borrowed to buy shares, or other loans relating to investment portfolios. 


Depreciation

Any property is susceptible to general wear and tear. This affects the financial value of your property and fittings, which is referred to as depreciation. 

Depreciation can be one of the best things for your bottom line at tax time when it comes to investment properties. It is a tax deduction that is built-in with the cost of the property, you don’t have to pay for it on an ongoing basis. The depreciated value of the building is calculated and claimed on your tax return as a ‘non-cash deduction’. 

This could enable you to save a significant amount of money, however, to be able to claim depreciation on your tax return, the building must be used as an investment property and have been built after 1985. 

As well as the building itself, you can claim a tax deduction for the depreciation of fittings, such as lights, power points, sinks and windows, which are subject to wear and tear over time. A qualified building surveyor can calculate the cost of depreciation on fittings and buildings. 


Claiming tax deductions on your investment property

To maximise your tax return, make sure to find out the claimable deductions for your investment property. Having this knowledge will ensure you are best positioned to take advantage of all tax return opportunities available through your Clyde North investment property. 

As there are numerous tax claims you can make on investment properties, speaking with a professional can help ensure you get the most financial benefits from your property. 

Keep in mind you can’t claim any expenses without proof, so be sure to always keep receipts, invoices and any documents relating to your investment property that can be used to determine tax deductions. 


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