Tax Tips for Private Landlords - RentingSmart

Tax Tips for Private Landlords

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Tax Tips for Private Landlords

There are some golden rules regarding tax and tax deductions. If you can get your head around these, or have the advice of a professional accountant or tax agent, you may be applicable for many tax deductible expenses that you’re not even aware of, including depreciation – without getting into the trouble many landlords may soon be facing.

First of all, you need to understand what “Tax Deductible” means.

According to the Australian Tax Law, you can claim a tax deduction expense that you incur through your rental property. This means that your expenses must have a relevant connection between your rental income and rental deductions in order for your tax to be deductible.

If you’re an aspiring Landlord who wants to get the most out of your property tax management, here are some useful tax tips for you.

7 Tax Deductions to discuss with your Accountant!

(Read our tips and have a talk to your qualified tax agent)

1. Income Tax Deductions

One of the first things that you should look into is your income tax deductions. When calculating your profits, note that expenses are allowable only when they are done exclusively for the benefit of the rental business. Examples of this would be repairs on the property. Expenses such as accountancy expenses, advertising costs, insurance against loss of rents, insurance claim fees, rental warranty and legal expenses among others are also considered deductible.

2. Maintenance and Repairs

Maintenance and repair expenditures can be deducted from your tax liability. These include maintenance charges, cleaning, and fixture replacements. A fully furnished property allows you to claim 10% of your rental income as a tax deduction.

3. Recaptured Depreciation

As stated on the tax code, you are allowed to outlay the cost of purchasing your rental property building, as well as the improvements made, through depreciation. This means that you could get a large annual expense in order to lower your taxable rental income for each year. Remember though, that when you sell your property for more than its depreciated value, you may need to have a recaptured depreciation; adding a portion of the depreciation value back to your taxable income.

4. Count Your Travel expenses

Yes, you can reduce your tax bills by taking into account your travel expenses for visiting your property. This includes visiting the property to collect rent, inspect and make improvements.

5. Rental Property Insurance

Rental property insurance is tax deductible. This may include documenting any property losses due to robbery, natural disaster and late rent payment.

6. Legal and Professional Fees

Hiring a tax agent, accountant or lawyer to provide services for your rental property is tax deductible. For instance, if your lawyer drafted documentation for your rental contracts, the legal fee expense is considered business-related, and therefore you can deduct it against your rental revenues.

7. Home Office

Having a rental property business means you are eligible to set up your own office where all rental transactions are being made. This also allows you to deduct your home office expenses from your total taxable income. Deductions may apply on the office space and all the expenditure made to maintain your home office.

So there you go. Always remember to look after your tax. A little discrepancy could make or break your rental business, so keep your eyes on these crucial matters.