Every property investor is eligible for several tax deductions that can help them maximise their investment returns. One such deduction is tax depreciation. However, unlike other deductions, tax depreciation is more complex.
This post will take a closer look at tax depreciation.
What Is Tax Depreciation?
Your investment property and its assets will experience wear and tear over time. This erosion will make the property’s value depreciate. The good news is that you can claim this depreciation as a tax deduction.
Why Is Tax Depreciation Essential to Property Investors?
Property investors should appreciate tax depreciation.
- Can get you thousands if you are a residential property investor and hundreds of thousands if you own commercial properties
- Helps you improve cash flow
- Can lower the tax payable
- Can make a brand-new property more affordable
- Enables you to reduce the loss a negatively geared house incurs What Can You Claim as Tax Depreciation?
Tax depreciation falls under the following two categories.
Division 40 Plant and Equipment
Such assets include mechanical items that you can easily remove from a residential investment property. Under this category, you can claim depreciation for assets such as air conditioning units, solar panels, and blinds.
Division 43 Capital Works
These are also deductions you can claim for the wear and tear of your property’s structure and assets fixed to the building. This category also includes structural improvements you or a previous owner made, covering walls, driveways, doors, fences, and bathtubs.
How to Claim Your Tax Depreciation
The easiest and quickest way to claim your tax depreciation is to set up a tax depreciation schedule with a skilled quantity surveyor. The surveyor will prepare the schedule that you can use to apply.
The schedule will also help you determine if your property qualifies for this type of tax deduction. Typically, owners of residential and commercial properties, along with leasees of commercial properties, can claim this deduction.
The best part is that you will not need to pay for the schedule every year. It is a one-time investment that’s also fully deductible the year you purchase it.
Claim Tax Depreciation and Make Property Investing Affordable
Property investors should value tax depreciation time for how affordable it can make their investing.
To learn more about how the experts at Active Agents can help, call us on 1300 141 446.