Getting the most out of your investment property is not easy, even if you knew which property to buy. The easiest way to overcome this obstacle lies in knowing what you can claim and understanding the rules to this. As an investor, it is your obligation to maximize the value of your own investment, therefore, you need to find a way to reduce tax on your investment property in the best way possible. Here are the top five tips that will allow you to do this.
Capitals gain tax
The simplest way to avoid the bulk of capital gain tax is to hold on to your property longer than a year. This is problematic to those who intend to fix and flip the place but might not be that difficult for those who are in this for the long run. If you hold on to a property for longer than five years and if it’s been listed as your permanent resident for at least two out of these last five years, you may be exempt from this tax. While this may sound too difficult to pull off, the savings made this way is definitely more than worth it.
Scrap while renovating
Scrapping while renovating allows you to claim a depreciation deduction for the value of removed assets. It really is that simple. The biggest problem with this, however, lies in the fact that you need a depreciation schedule both before and after the renovation. In fact, while you’re at it, you might want to go for tax depreciation schedule quotes from professionals in order to get the most out of the project. The thing is that scrapping while renovating gives you a tax depreciation while increasing the overall value of the home (like with any other renovation). It’s a double-fold win that you just can’t afford to ignore.
Repair and maintenance
Owning a property and keeping it fully maintained is not without its costs. Needless to say, this is something that you can claim. The biggest problem with this deduction lies in the fact that a lot of people don’t really know what they can claim. Sure, it’s obvious that replacing your garage door may be eligible but simple maintenance tasks like oiling a backyard deck counts as well. Missing out on these maintenance deductions usually means giving up on claimable assets. This is a mistake that you can’t afford to make.
Claim for vacant land
Some people decide to buy vacant land with the intention of building on this soil. In that case, you can file a claim all sorts of tax deductions. For instance, you have the holding cost expenses, loan interest and council rates. Still, it’s not that easy to file for all these deductions. You must first prove that active steps are taken for you to construct the property in question. Also, it’s important that you keep all the records of your investments. This will prove to be invaluable when it comes to calculating the capital gain of your investment.
Keep all the records
Finally, regardless of what you do, it’s pivotal that you always keep the records. This means safeguarding all the contracts and receipts. Keep in mind that if you can’t verify something, you definitely can’t claim it. The thing is that keeping records really isn’t that hard. In this day and age, you can request a receipt in a digital form. This way, you can keep it indefinitely. Other than this, you can always take a photo of a receipt and keep it on the cloud. Either way, it’s far simpler than it ever was.
At the end of the day, the more you know the more you’ll be able to save. Now, while it’s a common fact that knowledge and profitability of your investment are in a tight correlation, nowhere is this as apparent as in property investment. There are so many maintenance expenses that you can claim and so many new ways to approach the topic of depreciation, that you simply have to explore. So, do your research and ask experts for help. This way, you will get the most out of your property investment. For more information about financial advisory services, check out Liston Newton Advisory.