Property investment isn’t just a surefire way to earn money. A little known secret is that if you handle it right, you can make money on your taxes for simply including some of your cash expenses on your tax returns! Simply going the extra step could net you back a lot of money come April. All you have to do is follow the steps below to the letter, and you could find that tax season can quickly become your favorite season.
First, you need to meticulously document your real estate income in all of its forms.Specifically, we will need you to provide a Rental Property Summary Report, which you can get from your Real Estate Agent. In addition, you should also provide documentation of all other income, like damage payouts and tenant reimbursements. Also, whenever you sell a property you will also need to provide the purchase and sale contracts so we can calculate your Capital Gains.
Tax returns are the best part about Taxes, and as a Property investor you can make money on different aspects of maintaining your real estate. For example, you can earn returns on the administrative costs of maintaining your property, like postage used to send property documents, phone bills related to property maintenance, and legal bills related to tenant problems. You can also get returns for Landlord insurance, building insurance, and public liability insurance, as well as Bank Charges, lease document expenses, and fees and commission for Property Agent expenses. As well as what has already been mentioned, you can also receive returns if you report and track your cleaning, pest control, gardening, and security services as part of your expenses related to maintaining your property.
It is important to understand that repairs are not seen as the same thing as home improvements. For example, fixing a broken window is a repair and can be written off. Installing a new window and frame to improve your rental price is an improvement and can be depreciated by 2.5%. So you need to make sure that when you file for returns that you’re doing so for repairs and not for improvements. With that in mind, you can also get returns for plumbing, electrical, and handyman repairs to your property. Remember, keep track of these expenses, or you won’t get reimbursed. You can also be reimbursed for the interest rates on a property loan (keep in mind that in order for the interest to be deductible, the loan must have be for an income producing property, not your own house).
You may be able to obtain returns over the course of multiple years depending on your situation for borrowing expenses such as loan application fees or title search fees. Borrowing expenses may also include depreciating assets such as plants or equipment, something the ATO calls a “Decline in Value.” In the same vein, building construction depreciation may qualify you for a “Capital works deduction.” Here is a checklist.
If you have any further questions, call Amour Accountants!