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Owned a Property? What Do You Need To Know about Tax?

Posted by shanaka on September 8, 2016
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Owning a property, whether commercial or residential, can be a big step for many, as they make the huge investment by arranging finances from all possible sources and digging into their savings. Many might save for years for investing in a property of their own, and purchasing the said property might seem like the end of all paperwork and running about for them. But that is not the case, since the task of taxation looms large with all the clauses and classes. However, there are tax benefits also to help ease the burden of various expenses. These rental property expenses include property taxes, insurance, mortgage insurance, home office expenses, repair and maintenance expenses, etc. These expenses are deducted only in the particular year when the expenses are made. However, there is one expense that is deducted over the life of the property and that is depreciation.

Details about tax benefits linked to property depreciation

Depreciation is the reduction of expenses incurred during the purchase or improvement of a rental property. This depreciation of property  is not deducted from the taxable statement of income at one go, but is reduced each year over the period of useful life of the said rental property. However, not every property or asset is eligible for a depreciation. There are a few requirements that need to be met, such as, the property must be owned by the person claiming depreciation expenses. Also, the property must be involved in income generating activity or used for business purposes. The property must also have a determinable life of usefulness and this must be more than a year. On these principles a piece of land cannot be considered depreciable since it is not subjected to wear, tear or decay and can be useful indefinitely. Furthermore, equipment and other residential and commercial items within a property can be considered for property depreciation. These include driveways, doors and door furniture, fences and retaining walls, built in kitchen cupboards, bath and toilet bowls, sinks and basins as well as clothes line in residential property.

Depreciable assets include equipment and plant, such as air conditioning units, security systems, swimming pool cleaning and filtration systems.

Hot water systems, like heaters and solar panels, curtains and blinds, light shades, desks, flooring and carpeting, shelving, commercial ovens and manufacturing equipment of residential along with commercial property are also included depreciable assets.

Pointers to claim depreciation

Once it is clear what property and its assets and equipment are eligible for claiming depreciation, the next step is to knowing how to go about it. Property investors in order to make a depreciation deduction claim must enlist the services of a quantity surveyor perth who are specialists in carrying out a comprehensive schedule for tax depreciation.  The schedule highlights the deductions available for each taxable financial year for the said income generating property.

Summing up

Tax benefits, such as property depreciation, can initially be complex to comprehend and thus many forgo the deductions which could over the years equate to the price of the property. Thus, hiring specialist surveyors and laying out a schedule can help take advantage of assets and equipment in the form of deductions spanning over a period of years.