Real estate can be an excellent way to make money as an investor.
Not only does property investment have the potential to produce great returns long term, but also these investments often have excellent tax advantages. This can add diversification to your overall investment strategy.
Real estate has helped millions of people get on the path to financial freedom, and it could do the same for you!
Let’s look at five ways that property investment can make you money by helping you pay less tax.
5 Tips to Save on Taxes:
1. Interest
When you take out a loan for an investment property, you can claim any interest that you are paying on that loan as a tax deduction. This could include interest accrued through a mortgage on an investment property, money borrowed to buy shares, or other loans relating to investment portfolios.
Let’s say you have a $500,000 mortgage on a rental property where interest is charged at 5% per year and paid monthly over a 30-year period. Over a 12-month period, you would pay around $15,542 in interest for that loan. That would be a $15,542 tax deduction to offset the cost of your investment property!
2. Rental Expenses
When you own rental properties, there are a number of expenses that can be claimed to help offset the amount of tax you pay each financial year. Some of the most common expenses you can claim immediately include:
- Advertising for tenants
- Body corporate fees and charges
- Council rates
- Water rates
- Land taxes
- Cleaning
- Gardening
- Pest control
- Insurance
- Property agent fees and commissions
- Property repairs and maintenance
You can also make claims for any travel you do that’s directly related to the property, such as inspections or rent collection. Keep in mind that it is imperative to keep a log of all your expenses as they happen along with your mileage.
3. Building Depreciation
General wear and tear is inevitable for buildings. This process is referred to as “depreciation” and affects the financial value of items. When it comes to investment properties, depreciation is one of the best things for your bottom line at tax time. What makes depreciation beneficial is that it is a tax deduction that comes built-in with the cost of the property, so you don’t actually have to pay for it on an ongoing basis. Instead, the depreciated value of the building is calculated and claimed on your tax return as what’s known as a “non-cash deduction”. Are you curious how much you could save on taxes with an investment property? Let our team put together a complimentary report for you!4. Loan Costs
When we get a loan, we are primarily paying attention to the interest rate. Unfortunately, there can often be additional costs associated with the loan. These costs can quickly add up, but there’s good news! These loan costs can often be claimed for investment properties, with tax deductions available for things like loan establishment fees, account management fees, mortgage insurance fees, mortgage registration, mortgage broker fees, and stamp duty on the loan (not the property). Most of these claims are made over a five year period, as part of borrowing costs, and can add up to hundreds of dollars in tax deductions each financial year.5. Accounting Costs
Did you know you can get even more leverage out of your investment property by deducting any costs related to filing your property taxes? Believe it or not, accountants are helpful for more than your yearly tax return. Their services could actually help you pay less tax! The actual fees and charges you pay for managing your tax affairs are claimable as tax deductions every financial year. You can even deduct the mileage from traveling to and from the accounting office for tax advice or preparation. You can also claim costs for any valuations you need to obtain for certain tax deductions, such as property surveying reports that you may need to lodge depreciation claims. When you activate all the tax benefits from investing in property, the savings can be huge. That’s why so many investors believe property is the best long-term investment for your money!We Can Help
Ready to discover how much you could save on taxes with an investment property? We can help! At OneCorp, we combine your vision with our knowledge. We’ll help you find your dream property while holding your hand through the whole process! Getting started on your investment property journey has never been easier:- We start by helping you set clear goals and objectives as to what you want to achieve through property investment.
- From there, we run the numbers through proprietary software to accurately assess exactly what you need out of a property portfolio to achieve those goals.
- Lastly, we find the perfect property to make those objectives a reality!