Maximise Your Rental Property Tax Deductions This Year!

These days, an increasing number of savvy real estate investors are purchasing new Mimosa homes solely for the purpose of renting them out as income generating properties. If this is something you did in the Melbourne area within the past year, you should also be aware of the tax deductions you may have available to you as you prepare to start working on your tax returns.

Deductions on Borrowing Expenses

First of all, houses or house and land packages that were purchased in the most recent tax year may entitle their investors to specific deductions on borrowing and loan costs. This includes not only loan establishment fees and title search fees (which you would have paid before closing), but also your mortgage broker fees, valuation fees, and even mortgage insurance. Make sure to keep detailed records of these expenses throughout the year so you can accurately report them and deduct them on your taxes.

Interest Tax Deductions

One deduction that you definitely won’t want to miss out on is mortgage interest paid, especially when you consider the fact that the majority of your mortgage payment on the rental property is probably going towards interest. For many investors, this is the largest tax deduction you’ll be able to enjoy, so it’s important to keep careful track of interest paid. Furthermore, your mortgage lender should provide you with a tax statement/form at the end of the tax year that summarises your interest paid throughout the year. These are generally reliable, but it’s always a good idea to keep your own records for added peace of mind.

Other Possible Deductions

In addition to borrowing deductions and interest paid on your new rental home, there are some other miscellaneous expenses you may be able to deduct when it comes time to file your taxes as well. Consider, for example, any money that you spend advertising your home to find new tenants or clients. Generally, this is considered to be tax deductible, so it can be taken off your total taxable income for the year. The same applies to any lawn care services or similar services you provide to your tenants on the property, as well as the cost of any repairs or general maintenance performed on the home. Some of the best money you’ll ever spend when purchasing an investment property is having a professional depreciation schedule drawn up. This logs every depreciable fixture and fitting in the house and the time frame that they can be claimed back on. Many landlords fail to do this and miss out on thousands of tax-deductible expenses.

Some other possible deductions that you’ll want to consider on your rental property include:

  • Insurance on the property
  • Body corporate fees
  • Bank charges related to the rental

Finally, in the unfortunate event that you end up with a non-paying tenant, you can at least find some solace in the fact that most legal expenses related to evicting a non-paying tenant will also be deductible on your taxes. You should consult your accountant to ensure you are maximising the return on your investment property.

Overall, turning to professional home builders for your next rental investment property can be a great decision, and taking advantage of all the tax deductions available to you will expand your bottom line. For more information on custom homes (including excellent house and land packages) in Melbourne’s North and Western suburbs, contact the professionals at Mimosa Homes today.