Owning a rental property is one of the ways you can invest to earn long-term gains while earning residual revenue in the process. As the value of your property grows, you receive a steady income from renting the property out to the right tenants.
As a landlord, however, you still need to pay taxes on the property as well as the income you get from renting it out. As with other taxes, there are ways to minimise your taxes. We have the best tips and tricks you can use to minimise your taxes as a landlord in this article.
Use Negative Gearing
According to the guidelines issued by the taxation office, rental properties are considered negatively geared. The expenses you can claim against your rental property are often bigger than the income you receive in return.
Negative gearing is a great way to save on your taxes as a landlord simply because you can claim the full amount of deductions against your rental and other income for the relevant year. This is also the reason why more people are investing in rental properties right now.
Remember that you can only claim negative gearing when you actually face one. That said, you are allowed to include expenses like the interest you pay on the financing of your rental property and other rental expenses.
Turn to Technology
The tax code is complicated by nature. While attempts to simplify the tax code have been made these past few years, many landlords – and homeowners in general – still find calculating their taxes to be too complicated.
The complication often leads to an inability to save on your taxes due to the fact that you are not claiming the full tax deductions available to you. Fortunately, there is a simple way to get around this. You can turn to technology for a solution.
There are apps, software, and web services that focus on helping you calculate your taxes. Online Tax Return is a good example of a fantastic tool that assists you every step of the way, from calculating your taxes based on your specific situations to filing your tax return online.
The built-in calculator takes factors like the fact that you own a rental property into account. It will then ask you all the right questions and recommend the best way to file your tax return and save on your taxes.
Know Your Costs
Last but certainly not least, you need to dig deeper into the rental expenses you make in order to optimise your taxes accordingly. It is important to understand the expenses you can claim against your rental income.
The mortgage loan interest isn’t the only rental expense you can add to your calculations. You can also include direct expenses related to renting out the property, building insurance, repair and maintenance costs, and even depreciation of the property itself.
Combined with the negative gearing we discussed earlier, minimising your taxes as a landlord should be easy. Make sure you stick to the regulations and ensure that you file your tax return correctly to save the maximum amount of money on your taxes.