Property investors are entitled to claim a number of tax deductions in relation to their rental properties.
What follows is a checklist of the most common allowable deductions with respect to deriving rental income from tenanted properties.
- Advertising costs for tenants;
- Non-capital repairs and regular maintenance costs (as opposed to improvements which are capital in nature and non-deductible until the property is sold);
- Land tax, council and water rates, body corporate or strata levies;
- Insurance premiums (including building, contents, theft, fire and public liability);
- Interest on money borrowed to acquire the investment property;
- Borrowing expenses including stamp duty and legal fees connected with the mortgage, bank application fees, valuation fees, survey and registration fees, guarantee and search fees (Note: the deduction for borrowing costs is spread over the term of the loan or five years, whichever period is shorter);
- Travel costs to inspect the property;
- Management or agent fees paid to real estate agents to manage the investment property and commission paid for the collection of rental income;
- Lease preparation costs and mortgage discharge costs;
- Bank charges on accounts specifically maintained to receive rental income or provide for maintenance disbursements, financial institutions duty on deposits of rental income;
- Telephone calls to real estate agents, tenants and repairs tradespeople;
- Printing, postage and stationary costs incurred regarding the rental property;
- Depreciation on the furniture and fittings in the investment property owned by you as landlord. For example, carpets, blinds, hot water system and light fittings;
- Legal costs where they relate specifically to rental income (as opposed to the acquisition or sale of the investment property) and
- Special building write-off deductions. (Generally, for residential rental properties constructed after 17 July 1985 you’re entitled to a deduction of 4% p.a. of the construction cost, and 2.5% p.a. where construction commenced 15 September 1987).
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Note: Readers should not act solely on the basis of the material contained in this article. Peter Rogozik Property Consulting expressly disclaims all liability for any loss or damage arising from the reliance on this document.