The tax trick that property investors need to get their renovation deductions in order
Knowing the difference between renovations and repairs can mean the difference between a timely tax return and an audit ...
Tax deductions can be concealed behind walls, in ceilings, under floors and on roofs – the combined value of which can reach tens of thousands of dollars, a depreciation expert has said.
Investment properties contain tens of thousands of dollars’ worth of tax deductions that investors often overlook, BMT tax depreciation CEO Bradley Beer said.
According to Mr Beer, tax deductions can be concealed behind walls, in ceilings, under floors and on roofs, and some are often overlooked despite possibly reaching thousands in value over their lifetimes.
One such unseen depreciable asset is underfloor heating.
“It would be reasonable to expect a depreciation deduction of around $10,000 for underfloor heating for an average-sized house,” Mr Beer said.
Other unseen assets include “inconspicuous re-wiring and re-plumbing”, which may be required for an older property, or when a property has been damaged.
“These items could produce a total depreciation deduction of $16,000.
“It’s hidden deductions such as these that can produce valuable deductions in older properties. Even if the improvements were completed by a previous owner, the current owner can still claim them,” Mr Beer said.
Extra deductions for solar pool heating are usually tucked away on the roof.
Meanwhile, it’s common for a rural property to have its own sewerage treatment assets and tanks, but these can easily go unnoticed as they are ‘out of sight, out of mind’.
“Underground sewerage treatment tanks and piping can produce a total depreciation deduction of $11,600,” Mr Beer said.
His key message for investors is “never rule out depreciation”.
“Throw out the idea that your property might be too old or your haven’t owned it for long enough – these are simply myths. And as we can see, thousands of deductions can be found where you can’t see them,” Mr Beer concluded.