This year has been a year of challenges. These challenging times are leading to many investors asking the question how can I save money this year?
One of the ways many investors can save money is by looking for ways to reduce their tax burden. That naturally leads to thinking about tax deductions.
If you are a property investor you’re most likely claiming the usual council rates, interest payments, and possibly repairs.
There’s one property related tax deduction that many miss and it’s often the largest of all deductions after interest payments. Maybe that is because it’s not claiming a deduction for an outlay.
Because you are using your property to generate an income, it’s treated the same as any other income producing asset. That entitles you to claim Depreciation on your property as a tax deduction. It may seem a little counterintuitive since your property appreciates in value over time.
While your property will go up in value over time, the building itself will suffer from wear and tear and depreciate.
Great, now you have answered the question of how I can save money this year, you would think you can head on over to your accountant and they start claiming Depreciation. Not quite….
It is quite simple to start claiming Depreciation, but there is a step in-between.
Your accountant will need to know how much depreciation they can claim. While your accountant can easily work out how much depreciation to claim on something like a car, that is because it is one item and they know what you paid for it.
When you buy a house, it contains items of plant and equipment, things like ovens, dishwashers, curtains, and blinds etc. They all depreciate at different rates and are treated differently to the building itself. How would you know what you paid for all those items when they were just included with the property? How do you work out what it might have cost to build your property when it was built? If it’s an apartment, what about common area items like lifts, gyms, pools, security systems, etc. that you partially own? Even if you built a house and have the total build cost, it won’t be broken down in a way that your accountant can use.
That’s why you’ll need the services of a Quantity Surveyor who specializes in tax work. They’re qualified to estimate construction costs and provide that information to your accountant in a document called a Depreciation Schedule.
If you have an existing investment property and you haven’t been claiming Depreciation or if you’re about to purchase an investment property get in touch now for no-obligation free quote. If you need a building inspection as well, we can do one inspection for both meaning .
To find all the answers to your investment property contact Jim’s Building Inspector today on 131 546.