How to claim tax deductions on investment property

One of the less understood benefits of buying an investment property is the opportunity to claim tax deductions on certain elements.

For example, there are cash deductions for items such as interest on borrowings, rates, management fees, etc There are also non-cash deductions on items such as property depreciation. This extra money can be used to help pay your loan off faster.

Example of possible tax deductions on an investment property

If you had an income of say, $80,000, you would be paying approx $26,000 in tax. If you purchased a new investment property for $350,000 you could reduce your tax by approximately $8,000 to $18,000 and use this money to help pay for the property.

Tax savings depend on how you structure your purchase and your choice of property. There are three ways to borrow money for an investment property:

Gearing - borrowing money to invest.

Negative gearing when your borrowing (interest and expenses) exceeds the income you receive on your investment.

Positive gearing - when your borrowing costs (interest and expenses) are fully covered by the investment income.

InvestRite Australia can show you how tax deduction can work in relation to your own property investment options. Contact us on 02 9741 8333 to speak with a specialist.

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