If you have been considering purchasing investment properties, then you will be aware that there can be major financial benefits that can come with property ownership. What you may not be aware of is that investment properties can also bring substantial tax benefits. Here are four tax advantages that you can get when you purchase investment properties.
Benefit from capital gains tax exemptions
While you can only get an exemption on one property it is always worth checking that you qualify for capital gains tax exemptions by using the property as your main place of residence. This way when you do choose to sell the property you will not be required to pay tax on the growth in the value of the property. If you want to claim an exemption for a property that you have been renting out, then it's a good idea to speak to a tax advisor since there are some circumstances where this is possible.
Understand depreciation
Depreciation is the technical term for the decreasing value of either the building or the items contained within the building. This could be items of furniture which wear out as they are used or perhaps wear and tear on the property itself. While this isn't actually money you are paying out, you can still claim the reducing value against your costs for that financial year.
Enjoy negative gearing
Sometimes you will lose money on your investment property. When that happens, you can make a claim against any taxes you have paid in other ways. For example, perhaps you paid taxes through your paid employment or as a result of other investments you own. Your specific circumstances may vary and it is always useful to speak to a tax advisor but in general, you should expect to be able to reclaim some of the taxes and therefore lose less money overall.
Claim for your mortgage interest
When you take out a mortgage to buy investment properties, the interest you incur is classed as an expense and is considered tax-deductible. If the mortgage you take out happens to be an 'interest only' mortgage, then you would constantly qualify for the maximum tax deduction. To find out if this is possible for you, it is important to speak to a tax advisor and ensure that you are getting the correct amount of tax deductions.
To learn more about investment properties and the tax benefits associated with them, reach out to an investment professional near you.
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