There are certain points to consider when you are thinking about investment property tax depreciation. Deppro tax depreciation can help you especially when you bought a property and considering to start living in it or renting it out as a rental property. You need to think and understand the implications on tax deductions as it can affect what you can or can’t claim as investment property tax depreciation.
What is Property Tax Depreciation?
Property depreciation is a legal tax deduction that is proportionally related to the property you invest in. In simple words, you may be able to declare a tax deduction due to your property getting older with time.
What Are the Crucial Things to Remember?
Many investors invested in a property and made the mistake of occupying their home only to find out that they are not eligible for certain tax deductions. So, it is very important to do thorough research on investment property depreciation rules before you get down to business.
Here are two crucial things to consider:
1. Investment Property Tax Depreciation for Primary Place of Residence
If you choose to reside in a particular investment property, it becomes a primary place of residence. The tax implications like mortgage repayments, land tax, maintenance, and council rates of this property cannot be claimed any longer. This is because you can no longer produce income from the property to offset this against. You can also not claim any investment property depreciation. You or an investor after purchasing a new property will be able to claim on both investment property tax depreciation components (Plant and Equipment and Capital Works) if it’s rented at the first instance. This means you can produce an investment property tax depreciation schedule on kitchen appliances, air conditioning units, etc. It is effective within the first five years. If you decide to occupy the property and later in the future, rent out the property then the tax depreciation applies to capital works.
2. Benefits of Primary Place of Residence beyond Investment Property Tax Depreciation
There are long-term taxation benefits when it comes to investing in a property. You can go for capital gains tax benefits on the sale of the property that is, live in for a short period to minimize the capital gains tax obligations. You can also get other benefits that include first home-owners grants and other government initiatives. It is for you to remember, if you choose to rent out at first instance this will entitle you to reduce your capital gains tax by 50% with certain conditions. For further details, you can check out property investment returns.
If you choose to live in or rent out the property, the decision lies completely in your hands. However, you need to be fully informed of the implications of your decision or choice from both taxation and economic standpoint. You should also go through the depreciation on investment property ATO before making a purchase. For more queries, you can contact us online.