For leveraged property investors building portfolios utilising your tax deductions to reduce your tax and pay towards your property purchase is crucial part of the strategy.
Capital Growth Property
Claiming a tax deduction on an investment property sometimes becomes a bit of a reflex action. Many people live under the impression that if they have incurred a cost that is related to their investment property, surely they must be entitled to claim a tax deduction on the cost. Unfortunately, the tax law is anything but simple, which can easily catch the unsuspecting. This article looks at the common mistakes investors often make in claiming tax deductions on their investment properties.
1. Claiming an expense that has not been incurred
As simple as this may seem, you can only claim a tax deduction on an expense that you have actually incurred. For example, if you spend time doing some repair work on your investment property, you cannot generally claim the time and energy you expended to do that work because you have not incurred the expense, which generally requires you to pay someone something. In contrast, the cost of the materials you use to do the repair work that is incurred at a hardware store will be tax-deductible. Likewise, if the repair work is done by someone else, then the cost of hiring that person will be tax-deductible to you.