Investment properties can hold a treasure trove of tax deductions, but many of these can easily go unnoticed without a trained eye.
Valuable deductions can be hiding behind walls, in ceilings, under floors, and on roofs. These hidden deductions can add up to tens of thousands of dollars over the property’s lifespan, making a significant difference to an investor’s bottom line.
What is property depreciation?
So, what exactly is property depreciation? It refers to the natural wear and tear that occurs to a property and its assets over time. The ATO allows owners of income-producing properties to claim depreciation as a tax deduction. In fact, depreciation is the second largest tax deduction available to property investors, following loan interest, and can be claimed for up to forty years.
Let’s explore five commonly missed hidden deductions in an investment property:
Often overlooked, underfloor heating can yield deductions of up to $10,000 for an average-sized house
Re-stumping a home
Re-stumping, also known as re-blocking, involves resetting or replacing the stumps that support a house’s subfloor. This is frequently necessary in older properties due to damaged wood or soil movement. Re-stumping can result in a depreciation deduction ranging from around $13,000.
Inconspicuous re-wiring and re-plumbing
Older or damaged properties may require inconspicuous re-wiring and re-plumbing. These improvements can generate a total depreciation deduction of approximately $16,000. Even if the previous owner completed these improvements, the current owner is still eligible to claim them.
Solar pool heating
Often hidden away on the roof, solar pool heating is easily missed but can contribute to a depreciation deduction of around $7,000.
Sewage treatment assets and tanks
Rural properties commonly have their own sewage treatment assets and tanks, which often go unnoticed as they are hidden from view. Underground sewage treatment tanks and piping can result in a depreciation deduction of $11,600.
Nearly every inch of a property is depreciable, but accurately determining the maximum amount of depreciation requires a physical site inspection. Failing to claim these deductions can mean missing out on thousands of dollars annually.
As you prepare for tax time, don’t overlook the hidden deductions within your investment property.
The article is provided by BMT Tax Depreciation. BMT Tax Depreciation is Australia’s leading supplier of residential and commercial tax depreciation schedules. For more information on how investors can best take advantage of depreciation deductions within an investment property, contact the expert team at BMT.
If you need assistance with your tax planning, contact KMT accountants today!