A good way to boost your tax refund is through rental property tax deductions. In simple terms, this means if you own a property and give it up for rent, you can claim some common rental expenses either in the same tax year that you paid for them, or over time. This includes any expenses you incur for the management and maintenance of your property.
Now, let us take you through some pointers for claiming your property expenses:
Up for Rent:
If you want to claim your rental property tax deductions for a particular year, make sure that the property was leased to tenants or advertised as available for rent for that year. If it’s available for rent or given out to rent for only some duration of the year, then you can only claim the deductions for that duration.
what you spend on your rental property is more than the income you gain from tenants, you can claim the loss as a rental property tax deduction each year. For more information on this negative gearing of your property for tax purposes, reach out to an authorized tax agent.
Your borrowing expenses (when you first purchased your property) can be claimed as rental property tax deductions, provided the cost is claimed over 5 years.
Capital Item Purchases:
Capital items such as dishwashers, ceiling fans, bathroom mirrors etc. that are purchased at the cost of $300 or less can be claimed in full in the same tax year.
Capital works, maintenance or repair:
Ongoing maintenance and repair costs incurred while the property is up for rent can be claimed in the same tax year. However, costs of renovations or improvements (capital works) need to be claimed over time. For example, fixing a broken kitchen cupboard is a repair that can be claimed immediately, but installing a new kitchen is a capital works expense that should be claimed over time.
Remember: Don’t misplace or throw away any of your expense receipts and documents relevant to income and expenditure for your rental property. You cannot claim any rental property expenses if your claim is not backed by a receipt or bank statement.
The Australian Taxation Office (ATO) provides a comprehensive list of what you can and cannot claim as per the type of expenses and it’s important to go through the list before proceeding with your claims.
Still confused? Rental property tax deductions can be a grey area. It is recommended to go through a registered tax agent to avoid any potential problems.
At Solution In, we ensure to not only process and boost your tax returns in the best manner, but we’ll also be happy to explain to you and help you understand how to claim your rental property tax deductions.