How to Treat Property Loan Costs on Your Tax Bill

If you are worried about the stock market and want to build a better future for yourself and your family, you may be looking at property. Although you may own your own home at present, you may be thinking about buying a secondary house and letting it out for rental income. If you do this, you will have to manage your investment carefully and balance your expenditure against your income. Crucially, you need to claim key expenses against your tax bill but does the cost of any borrowed money count in this situation?

Leveraging the System

Many people in your position may have a chunk of money available to act as a deposit. This will allow them to leverage the system and borrow the balance as a long-term loan or mortgage instrument. When it comes to tax deductions, depreciation is probably the most important factor. However, you can and should claim a number of other expenses to keep your tax bill as low as possible. If you do this correctly, you should be able to make a profit against your rental yield and benefit from the value of the property as well.

Handling Loan Costs

However, you cannot claim the principal sum borrowed against your tax. On the other hand, you will be able to claim the interest that may accrue on your regular payments as a legitimate investment expense. Many people in your situation will apply for an interest-only loan, at least in the early days of the project. If you're able to get such a loan, then you can claim the entire monthly amount against your tax bill, until such time as the loan may revert to principal and interest.

Other Related Expenditure

Often, the lender will ask for certain fees in order to put the package together. These are known as establishment fees, and you will be able to claim those back against tax. If you need to pay insurance against the value of the loan or need to work with an independent broker to put everything together, then you can also itemise those costs on your tax bill at the end of the year. Don't forget to add any stamp duty that you may need to pay to the government as you take ownership of the property.

Hire Expert Help

Property investment can be lucrative, but you will need to make sure that you handle the tax affairs correctly. This is why it's a good idea for you to bring in a tax agent from the outset. Contact services like Anthony Gigacz & Associates Pty Ltd to learn more. 

About Me

The Different Types of Tax

Hi, welcome to my new blog! My name is Russ. I have been a small business owner for many years. However, I recently inherited a large sum of money. I have no idea how this additional money would impact on the amount of tax I would be required to pay. Thankfully, my good friend Brian suggested I contact a professional tax service. The advisor looked through my accounts and explained the different types and rates of Australian tax. It was a great help and I am now confident that I am paying the right rate of tax. I hope you find my tax blog useful.