Everybody wants to maximize his or her tax savings but the question is how do you maximize your tax savings? One of the best ways of creating wealth today is by investing in properties because most investments raise a lot of income and they keep on appreciating day in day out. Most investors are usually interested on the capital gain of their investments or businesses and not the losses that they incur. As an investor, the more the deductions that you claim on your property the more the tax benefits or tax returns. Some of the six smart ways you can claim to maximize your tax savings are:
Repairs and maintenance
Repairs and maintenance are very necessary especially on an investment. This is because it makes the investments to retain their original state and even have a longer economic life. Restoring an investment or property to its original position is tax deductible provided the damage you are repairing is not the initial one or is not that which existed when the property was bought. Such costs therefore lead to deduction of capital works or depreciation.
The costs of tenancy
Tenancy costs are also worthy considering when you want to maximize your tax savings. Fees paid to managers of properties who procure your investments and the costs incurred when you are advertising for tenants are tax-deductible. The same tax also applies in case of any expenses associated with varying or the preparation of a lease with any or all your tenants. There are some costs that are not tax deductible such as those used in buying assets that have depreciated or those associated with structural improvements and this is because they are capital and therefore not subject to tax deduction. More explained here.
Interest attracts the largest deduction in terms of tax. Why do you think interest attracts such a big deduction? Interest is charged on your property or investment provided it is available for rent, it’s charged on the money that has been borrowed for that property and its tax-deductible, its charged on the repairs, improvements and maintenance and it’s also charged on other issues related to the tenant.
The expenses that are related to capital works are not tax-deductible or do they have a tax refund upfront. They are necessary on things that are part of the properties such as land and buildings or things that are affixed to the properties including the structural alterations, extensions, sealed driveway, retaining of a wall, structural improvement and many more.
There are some holding costs that are worth considering if you want to maximize your tax returns. The most common holding costs are cleaning costs, body corporate fees, contents insurance and building premiums, gardening costs, rates, fees of property managers, costs of security monitoring, pest control and many others. All these costs are tax deductible and upfront.
Depreciating assets are those assets that depreciate over time and they include assets like dishwashers, dryers, carpets, curtains and many others. The cost of buying such assets is not tax deductible upfront because this cost may depreciate over time. For more information about ways of maximizing your tax savings visit our website Www.taxreturnco.com.au