The end of this financial year is only days away, and that means it is once again time to get your paperwork in order so you can file your taxes. As someone who purchased their first investment property in the past year, you now have something new to include in your tax return. But before you can start, you are going to need an investment property depreciation schedule. What is it? Here's the lowdown on how this schedule will save some money on your tax bill.
What Is An Investment Property Depreciation Schedule?
When you buy an investment property, you are allowed to claim depreciation of the property as a deduction against the taxes you will pay on the rental income you earn. However, in order for you to make this deduction claim, you first need a property depreciation schedule.
This type of schedule is prepared by a licensed quantity surveyor, and they examine the property to determine the value of two specific parts of it. Firstly, they will identify all the plant and equipment of the property such as the oven, carpets and dishwasher. Each one of these items is given a value, and these items have a different rate of depreciation applied to them based on their average lifespan. The surveyor will list each of them on a schedule to let you know how much depreciation you can claim each year for them.
The building itself has a different rate of depreciation because it is built to last longer than the appliances in the house. Therefore, the building's depreciation rate will be listed separately on the schedule.
How Do You Organise An Investment Property Deprecation Schedule?
The good news is you only need to arrange for a property depreciation schedule to be prepared once during the time you own an investment property. However, the sooner it gets done after the settlement date, the better. This is because the quantity surveyor needs to see the property in the state it was purchased to most closely estimate the value of the dwelling and its contents.
Once the surveyor has physically inspected the property, they will provide you with the schedule, which shows you the annual claimable depreciation deduction for each item on the list. When you take the depreciation schedule, your purchase settlement statement and your mortgage statement to your accountant, they will then use these three things to calculate the reduced rate of income tax you will pay.
You do not want to miss out on this vital tax deduction available to investment owners. Since quantity surveyors do get busy at tax time, you need to get your investment property depreciation schedule booked in now so you are not left having to wait weeks for it to be completed.
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