The Tax Deductions You Can Claim If You Own a Rental Property

Tax Return

Owning rental property comes with its own sets of obligations and expenses. These expenses can afford you a range of tax deductions that will also bolster your tax refund check. Many Aussie taxpayers generally leave tens of thousands of dollars on the table simply by failing to maximize on the investment property tax deductions.

Tax Deductions on Rental Property

If you own rental property that is generating you some income, you can claim tax deductions on expenses incurred in generating that income. These are costs that are associated with owning and operating the property. If you are paying some property insurance, this will be regarded as an expense linked to the earning of your income and will be tax deductible.

Additionally, the rent that you receive from the rental property should be at the normal market rate for you to be able to fully claim all the expenses. If you are letting your property at below the market rates, you will only claim the deductions up to the amount of rent that you charge. The rent should also be declared in the year in which it was collected. You cannot declare rent for the previous tax year.

Here is a guide on some of the rental property tax deductions that you can go for this tax season in order to maximize on the tax refund:-

Interest on the Investment Loan

The interest that you pay on the loan that was used to buy the rental property is tax deductible as long as the loan was actually used in the property acquisition.

Repairs on Investment Property

The cost of repairs done on the investment property to keep it in good shape is also tax deductible. You can claim the cost of all the repairs done on the property for the duration during which the property was leased. Though, generally, you can’t claim the repairs that were done on the property during the first 12 months of ownership after the acquisition. However, these expenses can be subtracted from the capital gains.

Improvements on the property

If you have done some improvements on the investment property such as house remodelling or renovations, you can claim tax deductions on the expenses incurred.

Other Deductions that You Can Claim on Rental Property

Apart from the above, you can also claim the following expenses incurred when running or operating your rental property:-

  • The cost incurred when advertising for new tenants.
  • Council rates
  • Gas and electricity costs
  • Repairs and maintenance costs
  • Pest control
  • Interest on loans
  • Travel and car expenses incurred during property inspection, rent collection and property maintenance.
  • Quantity surveyor fees
  • Property cleaning fees
  • Lawn mowing and gardening fees
  • Mortgage discharge expenses
  • All tax-related expenses including tax agent o accountant fees
  • Stationery and postage
  • Bookkeeping and secretarial fees
  • Bank charges
  • Insurance costs including building, public liability and contents
  • Land rates
  • Property lease costs including stamp duty, preparation and registration costs
  • Property management agent fees and commissions
  • Water charges
  • Property servicing costs
  • In-house audio or video service charges
  • Cost of security patrols on the property
  • Cost of phone calls and internet charges associated with the running of the property
  • Body corporate

The Building Cost Write-Off

In case the property is less than 25 years old, you will be entitled to a tax deduction of 2.5% every year of the original cost of the construction for duration of up to 40 years from the original date of the construction of the property. If you are not sure of the original cost of construction, hire a quantity surveyor who will work out the cost along with the depreciation schedules of the property. This will help you in estimating the correct amount of money that should be claimed.

Planning to lodge tax returns for your rental or investment property this year?  Hire professional accountant Melbourne or taxation experts today who will help you maximize the tax deductions on your rental property.

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