How Investment Property Can Give You Tax Back

Growing your wealth can sometimes feel like a never-ending circle of saving, spending, and earning more. Tax time adds to the difficulty in achieving wealth. How can you break out of this cycle and achieve the financial freedom that you desire?

Unfortunately, many of the get rich scheme that you see on the internet can take us for a ride that doesn’t lead to what we are striving to achieve.

A safer bet on investment is to invest in bonds, savings, trusts, shares and investment properties. Here is a comparison of all forms of fixed income investment options that we offer.

Investment properties are great for tax reduction because they offer a variety of tax benefits, including deductions. They also have the potential of earning you more in the future.

Property market stability is also a good thing. While there may be fluctuations in demand and prices, the fact is that everyone should have a roof over his head. This simple fact could be the key to tax savings.

Can Buying & Maintaining an Investment Property Too Expensive?

This is a question that many people ask before looking into buying in the rental market. This is because many people ignore this option before even looking into it. They don’t want to pay the high cost of buying an apartment or house and the expenses that along with maintaining it.
This may sound fair especially given the fact that buying an investment property can cost you hundreds and thousands of dollars.

Star Investment offers a fixed income investment opportunity backed by a waterfront development project. This allows potential investors to invest and make monthly guaranteed returns of 12% interest plus achieve 10% capital growth. This does not involve buying an investment property and the cost associated with it, however, earn money through interest earned from your investment on a project that has over $125 million in GDV.

Having, if you buy a property in the right suburb and in the right market, you can achieve real wealth over a period.

Use Your Rental Property For Tax Deduction

When you rent out your investment property, there are many tax deductions available as well. Let’s look at each one and see how they can help you with your tax deductions.

1. Interest

If the loans are used for investment purposes, you can deduct interest charges. This includes interest on a mortgage that you have on investment properties, money you borrow to buy shares or any other loans related to your investment portfolio.

2. Rental Expenses

There are many expenses that you can claim for tax relief when you rent out your property. Listed below are some of the most popular expenses that you can claim right away including tenant advertising, council fees , land taxes, maintenance expense including cleaning, gardening, repairs including plumbing and electrical work , pest control, insurance.

These rental expenses can add up over time to thousands of dollars. You could reduce your tax bill by claiming them as tax deductions.

3. Depreciation on Your Building & Fittings

Depreciation is a great way to increase your tax return on investment properties. Some seasoned investors consider depreciation even before purchasing new property.

Depreciation is beneficial because it is a tax deduction that is built-in to the cost of the property. This means that you don’t have to actually pay for it on an annual basis. Instead, the depreciated property’s value is calculated and claimed as a non cash deduction on your tax return.

Similarly, tax claims apply to investment property fittings as well. This includes lights, fans, Powerpoints, windows, sinks and showers. These items are all susceptible to wear and tear over time.

Qualified building inspectors are qualified to calculate the cost depreciation for fitting and building. The details will then show how the asset’s value has decreased over time. It is possible to depreciate anywhere up to 5% of the cost of buildings and assets. This can often lead to significant tax deductions.

4. Loan Costs

While interest is the most common charge associated with loan costs, there are many other fees that can quickly add up. Anyone who has ever had a mortgage knows this!

You can claim these loan costs for investment properties. Tax deductions are available for account management fees, loan establishment fees, mortgage insurance fees and mortgage broker fees. Stamp duty on the loan itself is also available. These claims, which are part of borrowing costs and usually last for five years, can amount to hundreds of dollars each year in tax deductions.

Negatively-geared Property Strategy For Tax Benefits

This strategy is popular among investors who want to maximize their property investment while minimizing tax. This is how it works.

The idea behind buying an investment property is that you will have to pay less for short-term expenses including interest payments and maintenance than what you make in rental income. These ongoing expenses could be eligible for a tax deduction, which lowers the amount that you are taxed.
You may be able to deduct taxes from other income such as salary. This investment will ‘cost you money’ in short-term, but your property will likely continue to rise in value. This will give you capital gains over the long-term.

This strategy requires a strong capital gain to make it worthwhile. Also, you will need to ensure that your income and cash flow are sufficient to cover the shortfall in ongoing expenses.

The transaction costs associated with purchasing and selling property can be quite high such as stamp duty and real estate fee. To understand the tax implications of these strategies in your specific situation, you should consult a registered tax agent.