Example: If you have a dedicated home office in your $1.5 million property that takes up 10% of your home’s floor space, you might be able to claim 10% of your utility bills as a deduction. For instance, if your annual utility costs are $5,000, you could claim $500 as a deduction. More details can be found on the ATO website.
Property Taxes
Property taxes are often deductible, providing some relief on your annual tax bill. Ensure you have records of the property taxes you've paid over the year, as these can be included in your tax return.
Example: On a $2 million property, if you pay $8,000 in property taxes annually, this amount can be deducted, reducing your taxable income.
Mortgage Interest
Interest paid on your mortgage can be one of the most significant deductions for homeowners. This deduction reduces your taxable income by the amount of interest paid, which can be substantial over the course of a year.
Example: If you have a mortgage on a $1.8 million home and paid $50,000 in mortgage interest over the year, this amount can be deducted from your taxable income, potentially saving you thousands of dollars in taxes.
Renovations and Repairs
Expenses for necessary repairs and maintenance to your property can be claimed. This is particularly beneficial for investment properties. Common deductible expenses include:
- Repairing a leaky roof
- Fixing plumbing issues
- Replacing broken windows
Example: If you spent $10,000 on essential repairs to your $1.2 million rental property, this amount can be deducted, lowering your overall taxable income.
Depreciation
For rental properties, depreciation on the property itself and items like appliances and furniture can be claimed. Depreciation accounts for the wear and tear on these assets over time.
Example: If your rental property includes appliances worth $20,000, you can claim a portion of their value as depreciation each year, spreading the cost over several years. On a $1.5 million property, this can add up to significant savings over time.
Insurance Premiums
Premiums for home insurance can often be claimed as a tax deduction. This includes insurance for both the structure of your home and its contents.
Example: If you pay $3,000 annually for insurance on your $2 million home, this amount can be deducted from your taxable income.
Energy-Efficient Upgrades
Investing in energy-efficient upgrades like solar panels or energy-efficient windows might make you eligible for additional deductions or rebates. Governments often provide incentives to encourage homeowners to reduce their carbon footprint.
Example: If you installed solar panels costing $30,000 on your $1.5 million home and there's a government rebate of 30%, you could potentially claim $9,000 as a tax deduction.
Practical Steps to Maximise Your Deductions
- Keep Detailed Records: Maintain receipts and documentation for all expenses.
- Consult a Tax Professional: For personalised advice and to ensure you're maximising your deductions correctly.
- Stay Informed: Tax laws change frequently, so staying updated can help you take advantage of new deductions and credits.
Conclusion
Understanding and utilising these tax deductions can lead to significant savings for homeowners.
At Noble Avenue Real Estate, we are committed to helping our clients navigate the complexities of homeownership, including making the most of tax deductions.
By following these guidelines and seeking professional advice, you can ensure that you're maximising your tax deductions and keeping more money in your pocket.
