September 22, 2017

What is Investment Property Tax Deduction?

Buying a property in Australia is a form of long-term investment. If you’re planning to buy property anytime soon, there are several aspects that you need to know. One of them is the investment property tax deduction.

How to calculate tax payable and deductible on an investment property?

You can use a property tax calculator online to give you an idea on your tax deductions and the potential returns from your investment property.

There are tax consequences and deductions that you can claim when it comes to investment property. Here are some of the things that you need to know about investment properties and how these affect your tax return:

  • If the property is for rent, the income received from it is taxable to the property owner. The rent must be declared on the year when it is received, and the rent must be within normal market rates so you can claim all of the expenses. If the rent is below market rates, you can only claim tax deductions up to the amount of rent.
  • When it comes to interest claims, the interest paid on the loan that is used to buy the property is tax deductible, as long as the loan was used to purchase the property.
  • Repairs and maintenance that are done to the property during the period that it is leased are generally tax deductible.
  • Improvements which are carried out to the property are usually not deductible in full. Some choose to depreciate and claim during their effective life.
  • You can manage your own property or hire a managing agent who will do all property management-related tasks for you. Should you do the latter, the management fees that you will pay are tax deductible.
  • Landlord insurance offers protection in case your tenant leaves the property without paying the rent, or if he/she causes damages to your property. The cost of landlord insurance is generally deductible.

So how do you calculate tax payable and deductible on an investment property? You can use a property tax calculator online to give you an idea on your tax deductions and the potential returns from your investment property. However, it is always better to seek assistance of a professional so you will better understand your tax deductions and other aspects related to your property.

Do you have other ideas on investment property tax? Share your investment property advice in the comments section.

About the author  ⁄ Marxa Dillan

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