Tax benefits you can get from investing in property
If you are a rental property investor, you are entitled to various deductions, savings and potential cost benefits during tax season – but before you can claim you need to make sure you understand what the law says. This article explains which expenses you can and cannot claim for.
Tax benefits you can get from investing in property
With tax season in full swing, all landlords and investment property owners need to be familiar with the deductions they can and cannot claim in relation to their property. If you run a bed and breakfast or have rented out an apartment, you’ve undoubtedly incurred a few expenses during the past financial year, however, not all costs will qualify for a tax deduction.
As a property investor, you can normally claim a refund for a wide range of the expenses that arose during the production of rental income. Below are a number of investment property expenses you may be able to claim as a tax deduction:
- rates and taxes
- bond interest
- advertisements
- collection fees of estate agents managing the property
- insurance (only homeowners not household contents)
- garden services
- repairs in respect of the area let and
- security and property levies
Repairs, however, can be complicated to navigate. Property owners must understand that there is a fine line of distinction between repairs and maintenance on the one hand, and improvement and reconstruction on the other. Any work that has been done to restore the property to a good condition, such as fixing a leaking roof, counts as a repair, and can be claimed for. But, if you’ve replaced the entire roof to improve the look of the property, it falls under capital expense. You cannot claim a deduction on improvements as they are considered to increase the value to the property and is thus included in the base cost of the property.
When considering investment property for sale, it’s important to think about how it might affect your tax returns. Speaking with a qualified tax consultant will help you see where you stand and receive the maximum tax benefits specific to your situation.
