A negatively-facing rental property is a great way to reduce your taxes, but some don’t take full advantage of the available tax deductions. I’ve compiled a list of seven ways to maximize your deductions and get the most out of your property:
- Try to arrange an interest only loan on your rental property. If you have surplus cash, it’s best to pay off non-deductible non-property related debts such as home loans, credit cards, personal loans, etc.
- You can claim depreciation on a property, but this is something very few people actually do. A surveyor can produce a report that allows you to claim depreciation. This is such an effective tax deduction because you are not out of pocket for depreciation expenses. This is a significant deduction, especially on new properties, but many people miss out on it.
- Keep a folder where you keep all your receipts once you have paid your expenses. This means you won’t forget about the fee notice or the times you mowed the lawn, since the receipt will be in the folder when you visit your accountant at tax time.
- Every dollar counts, even if you spend $1 on a washer from the hardware store to fix a leaky sink, you should save that receipt because every dollar counts.
- Keeping with the “every dollar adds” theme, make a record of every time you phone or send items to your real estate agent or tenant, these items can add up too.
- If you are doing a repair on the property, ask us before proceeding with it. Some items may be classified as improvements and therefore depreciated over their useful lives, rather than being written off in the year the expense is incurred. Did you know that replacing damaged polished floors with carpet would normally be classified as an improvement and make it depreciable?
- Keep track of how many times you travel to view your rental property. You should be able to claim this as a deduction. You may need to provide this deduction if part of your trip is for a vacation.
This is not an exhaustive list, but it can help you get the most out of your rental property. Always remember, if you are making a decision and you are not sure if it will be deductible, call your accountant to discuss it.