We have previously discussed buying an investment property and the benefits that come with that. But did you know that many investment property expenses are tax-deductible?
As we know, investment properties are very tempting when we want to support ourselves financially and have financial freedom. Even better if it comes with its own tax benefits, right?
Being a landlord provides you with ways to lower your annual tax bill. In the end, it will be the difference between having a positive or negative cash flow. So let’s break down a few of the top tax-deductible expenses.
Loan interest: If there were any bank fees for servicing your loan for the investment property, you could claim the interest charged on it. What a great way to start!
Advertising costs: When we advertise our property for rent, we market it online, print media, brochures etc. The good news is these can all be tax deductible against your income.
Council rates: You can deduct rates in the year they were paid, but this only counts when the house was rented. So if your home was rented for six months of the year, you could claim 50 per cent of the annual rates.
Building deprecation: This one depends on when your property was built and how it has held up over time. But, if you qualify, you can claim a deduction on the depreciation of the building’s structure and renovations you make.
Appliance deprecation: If you have installed new appliances, including dishwashers and stoves, you can claim this over several years. All devices decline in value as time goes on, in line with the “effective life” of the installation.
Pest control: Immediate deduction for the cost can be claimed by whoever paid for the service.
Legal expenses: Legal advice and documents for rental activities are tax-deductible. These scenarios may include taking a tenant to court for unpaid rent, evictions, etc. The cost of going to court and preparing the legal documents will be tax-deductible.
It should be noted that all tax- deductibles only apply for periods when the property is tenanted. If there is no one in the house for periods of the annual year, this time frame will be removed from your claim, and you will just receive what is due for the months the investment property was housed.
As you can tell, it’s a long list of tax-deductible items. Do your research to make sure you are getting the most out of your claims. Owning an investment property requires you to have a good understanding of where you sit and what you deserve. If you have any further questions, give us a call on (08) 9202 9292 to chat about your investment property.