Sometimes, it can be harder to get a house loan, involving additional paperwork and stress. Though most people aren’t entirely clear about the perks, owning a home entitles you to several tax breaks.
To obtain these benefits, however, you must be patient and cautious, which should not surprise you. A property investor receives different tax breaks than an owner-occupier because of differences in ownership structures. If you believe you qualify for these benefits, it would be recommended to consult a specialist.
Even though getting a loan can be expensive, there are several tax deductions that you can take advantage of to reduce your taxable income. Being able to maximise these advantages is crucial. Let’s understand more about the topic:
What is the Mortgage (Loan) Interest Tax Deduction?
If the property you purchased with the loan produces taxable income, you can claim the loan interest tax deduction on the interest paid on your mortgage (loan). Although interest on your primary residence is not deductible, investment homes are eligible.
The fundamental tax law for borrowing money to purchase an investment property is that interest payments made on a mortgage are tax deductible, but principal (or capital) repayments are not.
Because interest is tax deductible, it is a crucial element of “negative gearing,” which allows you to use losses (partially generated by those interest deductions) as an offset against other income on your tax return.
Tax Benefits for Homeowners
Listed below are a few tax benefits for homeowners:
Running cost
Owner-occupiers may be eligible to deduct operating expenses even if they do not have a designated home office or work from home full-time. This entails receiving a tax deduction on the higher expenses acquired by working from home instead of an office.
Depreciation
When you purchase a new or almost new property, depreciation can be a sizable deduction because fixtures and fittings have a higher initial value and tend to lose that value more quickly.
You can deduct depreciation if you work from home and have a separate workspace. This covers the depreciation of the furnishings and equipment in your home office and the depreciation of items like carpets, drapes, and light fixtures.
The cost of renting out a room
And last, if you decide to rent out a room in your house, you can be eligible for many of the same deductions as a real estate investor even though you are an owner-occupier.
In this case, you can allocate your expenses according to the floor size of the space you’re renting instead of the whole floor area of your property because the ATO will handle your room like any other investment property.
Wrap Up
Significant tax benefits may be available to investors and owner-occupiers for their owned real estate. If you decide to go this route, you must maintain accurate records and recordkeeping of your costs.
You must discuss how these regulations apply to your situation with your accountant or tax advisor. Ultimately, there could be awfulimpacts if an error is made in a report to the ATO.
For more information, visit Soniez Group at https://soniezgroup.com.au/
