The Landlord’s Guide To Tax Deductions

It pays to get ahead in life. After all, everyday living is expensive, and it’s not getting cheaper anytime soon. Research shows that wage growth is not keeping up with inflation, so the cost of living rises at a faster rate than your salary.

And one way to get ahead financially is to invest in real estate. By owning a rental property, you have the chance at obtaining a passive income stream. The rent money from your tenants can go towards financing the home loan on the investment property, with any surplus being money in your pocket.

Investing in property is usually a lower risk investment when compared to higher-risk investments such as shares or ever-increasingly popular cryptocurrencies.

In this article, we’ll share some tips around tax deductions for landlords, including how to file a rental property depreciation schedule. Read on to find out more.

Depreciation Schedules – What are They?

You may ask what exactly depreciation is.

Depreciation, when it comes to taxation, means a reduction in the value of your investment property over its lifetime.

For instance, a motor vehicle is a depreciating asset, reducing in value over the course of its lifespan.

But you’ve heard that property usually appreciates, you say. This is true. However, it’s usually the land the home sits on that appreciates in value, while the physical home depreciates.

Also, claiming depreciation on your investment property against other taxable income, like money gained from your employment or your business, is a wise maneuver for tax purposes.

How Do I Claim a Depreciation Schedule?

First off, you should hire a professional surveyor to survey your home and prepare a report.

You then take this report to your accountant. If you don’t have an accountant, it’s best to get one, especially when dealing with investment properties.

You may ask why you couldn’t just use a value estimation as you can do via bank or real estate websites? The reason for this is because legislation says that if your property was built after 1985, only a surveyor can estimate the cost of construction.

So there is no way around it. To claim a depreciation schedule you must engage a professional surveyor.

What Are The Expenses Associated with Claiming Depreciation?

The cost of preparing a tax depreciation schedule will vary.

For instance, if you’ve purchased the commercial or industrial property as an investment, it will likely be a higher cost – due to the larger buildings and other aspects associated with different zoning.

So it’s hard to give an estimate of cost, as it will vary. It even varies between individual properties, and different surveyors and accountants will have varying fees depending on their companies policies.

The good news is that both your surveyor and accountant’s fees are tax-deductible.

What Else Can I Claim?

As well as claiming the depreciation schedule, you can claim other expenses associated with your investment property.

You can claim any depreciating assets that you have installed in the property since it was purchased.

This may include appliances, such as dishwashers, air conditioners, heaters and security systems.

You can also claim fixtures and fittings.

These are depreciated over the duration of their lifetime, and different assets will have different timings for this.

Claiming Conclusions

In this useful article, we’ve shared a landlord’s guide to tax deductions.

We covered what you need to know about a depreciation schedule, and how to go about obtaining one.

Also, we shared some other tax deductions you can claim, for instance, depreciation in any assets that you install in your investment property.