Everything you need to know about rental property tax deductions

investment property tax deductions

Tax time offers property investors an important opportunity to reap the many benefits of investing. But do you know which deductions you’re eligible for and how you can save yourself from paying more?

Get the most out of your investment and ensure you know what you can (and can’t) claim in rental property deductions.

Here are five allowable deductions every property investor needs to know about.

1. Interest on loans

Interest charges on loans used to purchase or renovate a rental property can be tax deductible. However, capital or principal repayments aren’t. If you‘re paying both principal and interest on your loan, you’ll need to take a look at your bank loan statements and calculate just the interest component that directly relates to your rental property.

2. Depreciating assets

To really maximise your rental property deductions, make sure you calculate certain types of depreciating residential assets such as curtains, dishwashers, ovens and hot water systems. Deductions can be claimed in the same income year that they were incurred, helping you pay less tax. Just keep in mind that construction costs are not deemed depreciating assets.

3. Tenancy costs

Did you know tenancy costs are immediately deductible expenses? This includes costs associated with preparing a lease agreement or the unfortunate event of evicting a tenant. You can also claim the costs of finding tenants, such as advertising and marketing.

4. Maintenance and repair costs

You can generally claim a deduction on costs you’ve paid for maintaining and repairing your rental property. This includes things like mending a fence, fixing the gutters or maintaining the plumbing. On the other hand, ‘improvements’ like landscaping or replacing an entire roof are non-deductible. If you’ve undertaken a renovation or extension, these costs are treated differently and may be deductible over more than one year.

5. Property assets

It’s also possible to claim some deductions over a number of years for assets that are part of the property. So this includes the cost of depreciating assets, borrowing costs and even structural improvements. When you claim these over a number of years (rather than one income year) they must be claimed as a decline in value deduction.

 Need help working out your rental property deductions?

For expert advice on protecting your investment property well into the future, contact Sydney’s rental property management experts K.G. Hurst.

“Image courtesy of Grant Cochrane / FreeDigitalPhotos.net”.

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