A negatively oriented rental property is a great way to lower your taxes, but some don’t take full advantage of available tax deductions. I’ve compiled a list of seven ways to maximize your deductions and get the most out of your property:
- Try to arrange an interest-only loan on your rental property. If you have a cash surplus, you are better off paying off non-deductible debts that are not related to property, such as home loans, credit cards, personal loans, etc.
- You can claim property depreciation, but this is something that very few people actually do. A quantity surveyor can produce a report that allows you to claim depreciation. This is such an effective tax deduction because you don’t have to pay depreciation expenses out of pocket. This is a significant deduction, especially on new properties, but many people miss it.
- Keep a folder where you keep all your receipts after you have paid your expenses. This means you won’t forget about the rate notice or the hours you mowed, as the receipt will be in the folder when you visit your accountant at tax time.
- Every dollar counts, even if you spend $ 1 on a hardware store washer to fix a leaky sink, you should keep that receipt because every dollar adds up.
- Continuing the “every dollar adds up” theme, keep a record of every time you call or post articles to your realtor or tenant, these articles can add up too.
- If you are doing a repair on the property, please check with us before proceeding. Some items can be classified as improvements and therefore depreciated over their useful life, rather than written off in the year the expense was incurred. Did you know that replacing damaged polished floors with carpet would normally be classified as an improvement and make it depreciable?
- Keep a log book of the times you travel to view your rental property. You should be able to claim this as a deduction. This deduction may have to be prorated if part of your trip is for vacation.
This is not an exhaustive list, but it can help you get the most out of your rental property. Always remember, if you are making a decision and are not sure if it will be deductible, call your accountant to discuss.