An Investor’s Guide to Investment Property Tax Deductions

Maintaining investment property can reduce the investor’s income taxes when certain investment-related expenses are deducted from their income. The expenses related to the maintenance of the rental property are generally deducted from the gross income of the investor. When allowed as tax deductions, the amounts claimed will reduce the total taxable income and reduce the investor’s tax bill. The Australian Tax Office allows only specific expenses such as investment property tax deductions. These require proper registration and record keeping to substantiate expenses.

Investment property tax deductions

Depreciation: The appliances and furniture used in the premises of the rental property suffer normal wear and tear over a period of time. Gradual deterioration reduces the value of these items, which is quantified as depreciation. Depreciation does not involve an actual cash expense, but has the effect of releasing some cash when deducted from the investor’s income.

Loan expenses: These refer to costs related to borrowing money that is used to buy a property. Deductible loan expenses include mortgage insurance, title search fees, mortgage registration, mortgage stamp duty, and loan establishment fees.

Commissions and management fees: These costs refer to the fees paid to the agents responsible for the rental of the property. It is often expressed as a percentage of the rental rate.

Sure: These include construction, contents, liability, and homeowner’s insurance that insure the investor against the predetermined rent. Mortgage insurance is deductible, but not all at once, and is generally amortized over the life of the loan as part of loan expenses.

Gardening and gardening: Expenses related to the maintenance of the rental property are deductible and include dump fees, trimmer expenses, tree trimming, replacement garden tools, fertilizers, sprays, and replacement plants.

Interest expenses: Interest payments made on a loan used to buy, build, improve, or repair property for income purposes are deductible.

Repair: These can be deducted only when the investor can demonstrate that the expenses were incurred to restore the property to its previous condition without changing its essential character. Some examples are the costs of repainting, cleaning and other restoration work.

Telephone and travel expenses: These expenses are deductible from income when used for rent collection, repairs, inspections, and property preparation for new tenants.

Other expenses that can be claimed as investment property tax deductions include rental expenses, cleaning, electricity and gas expenses, property tax, legal and administration fees, office supplies, pest control and town hall fees, water and sewerage.

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