Investment Properties: Four Essential Tips for Filing Your Taxes

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Property investors often lose money when filing their taxes because of poor understanding of the deductions that are available for them. Under ideal circumstances, you should engage an experienced tax services professional for help to ensure that the work is done correctly. However, it is also possible to file your property taxes and save without professional help. If you keep accurate records and relevant documents on your expenses, you can reduce your total tax significantly. Here are some simple tips to keep in mind for optimal deductions on investment properties.

Claim Advertising Expenses

If you have a lot of rental property, you will need to advertise to find tenants. The cost of advertising can be high, depending on the marketing approach. Therefore, it is advisable to plan on making claims for the money spent on your advertising efforts. You can make claims on print advertisements, signage, brochures and online ads. The claims must be made if they were paid for during the year for which you are filing the taxes.

Check the Interest Charges

It is important to reduce your tax expenses by making claims for the interest charged for your mortgage. The amount can be significant, especially if you consider the long-term benefits. It is also possible to get a deduction for other loans related to your property investments—for instance, if you took a loan to acquire property assets, for remodelling or even to purchase land on which the specific property is built. However, you must keep in mind that the claim might not apply if your said property was used for private purposes during that income year.

Offset Your Home Expenses

If you are an investor who works from home when managing your properties, you should look into deductions for home offices. This can help you offset some of your business expenses which would burden your private account. For instance, you can make a claim for utilities like electricity and water, at least for a portion of the total. Also, the costs of office supplies like computers and stationery might be deductible. In addition, look into the depreciation of your office furniture and other features.

Consider Management Costs

Finally, you should look at management fees for your property. This is a critical aspect if you do not manage your investments personally. The long-term benefits of this deduction will be quite significant. If you are interested in making the claim, you should ensure that your property manager provides you with detailed documents which may be required for effective tax reporting. 

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23 March 2020

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