Depreciation Report

Rental Property Depreciation Report

Every property has some value. The value of the property or asset actually defines how useful the property is and if it can be invested or not. It is important to keep the value of the property known and updated. The process of valuation of a property or asset is done by experts and not by common people. Property valuations are very essential for all owners. The act of estimating the value of a property or real estate is done by licensed professionals.

Property valuers are the highly professional and experienced people that help you in terms of putting a price tag to your property whether it is meant for the commercial, industrial or personal use. Some people also keep properties as investment. So, why do you actually need to value your property? The reason behind people getting help of the valuers is that one can have an estimate about their property and assist you in gaining better investments over it. The valuers can maximize the profit from the sale or rental of the property as well. The property valuers may also carry out compensation assessments, insurance valuations and investment appraisals. If you are not aware of the issues that may influence your property then you might be at risk. A good property valuer will keep you aware as well as advise you on legal and economic factors regarding your property. valuers are not just considered for property valuations they may also prove helpful for many other great deals of transactions as well. Selling, buying or leasing your property can become an easier task when handled by valuers. Trusted and experienced valuers can lower your pressure of maintaining and valuing a property. A lot of considerations have to be taken in account and many risks are involved in the process. To avoid fraud or loss of money or property, valuers give you a safe hand.

Depreciation is also related to the financing of properties. It is either the decrease in value or the allocation of costs to assets. Depreciation occurs on all assets owned by a person. A depreciation report is prepared for keeping records of it. The report must contain a few vital points. A physical inventory of the property should be included in the report. It is very helpful to purchasers, mortgage providers and insurance companies. They must be renewed and updated after regular intervals. A depreciation report is a legislative planning requirement. Depreciation is scheduled annually or after some intervals then it is calculated or updated again by some committee. Depreciation schedules for companies or owners of many valuable assets can be prepared by property groups. They make depreciation reports for commercial or domestic properties which is later referred by authorities to know the depreciation records and history.

Rental Deductions

7 Ways To Maximise Your Rental Deductions

A negatively geared rental property is a great way to reduce your tax, but some do not take full advantage of the tax deductions available. I have compiled a list of seven ways to maximise your deductions and get the most out of your property:

Try and arrange an interest only loan on your rental property. If you have surplus cash you are best to pay down non-deductible debts not related to the property, such as home loans, credit cards, personal loans etc.

You can claim depreciation on a property, but this is something that very few people actually do. A quantity surveyor can produce a report which allows you to claim depreciation. This is such an effective tax deduction because you are not out of pocket for depreciation expenses. This is a major deduction, especially in new properties, but so many people miss out on this.

Keep a folder where you hold all your receipts once you have paid your expenses. This means you will not forget about the rates notice, or the times you had the lawns mowed, as the receipt will be in the folder when you visit your accountant at tax time.

Every dollar counts, even if you spend $1 on a washer from the hardware store to fix a leaking sink you must keep that receipt because every dollar adds up.

Keeping with the theme of “every dollar adds up” make a log of every time you phone or post items to your estate agent or tenant, these items can also add up.

If you are making a repair to the property, please consult us before you go ahead with it. Some items may be classed as improvements and therefore be depreciated over its effective life, rather than written off in the year the expense was incurred. Did you know that replacing damaged polished floors with carpet would normally be classed as an improvement and make it depreciable?

Keep a log book of the times you travel to see your rental property. You should be able to claim this as a deduction. This deduction may have to be apportioned if part of your travel is for a holiday.

This is not an exhaustive list, but it can help you get the most out of your rental property. Always remember, if you are making any decisions and you are not sure if it will be deductible, call your accountant to discuss.

Property Taxes

Methods to Lower Property Taxes

Owning a home is expensive as property taxes can be extremely burdensome. Annual property tax bills tend to rise steadily over time. Even if you pay off your mortgage, the taxes keep coming. Most homeowners do not realize that they need to pay less and do not understand how their taxes are calculated. Most households take their tax assessments at face value, and, most of the time, their property is over-assessed.

Here, we provide a few tips that you can follow to challenge your assessment and save money.

1) Understand the process

Local governments send assessment notices in the first few months of the year, although the schedules may vary. The notice provides the details of the contact you need to contact in case you disagree with the assessment. It also provides the details related to making an appeal, and a specific time frame is given during which you can challenge or file a case. The time frame varies in different areas. In some places, it is two weeks; in others, it may be up to six weeks. If you miss this appeal window, you may need to wait until next year to protest. Also, check how your property is assessed in your area.

2) Request for property tax card and review it

The property card is often included with the assessment notice; however, this can also be accessed online. Alternatively, you can go to the town hall and request a copy of the property tax card from the office of the local assessor. The card contains information used by the assessor to determine the assessed value of your home such as size of the property, number of bedrooms and bathrooms along with their dimensions, garage etc.

Check for any discrepancies in the card as such errors are common. If there is any incorrect detail, raise the issue with the tax assessor. He/ She will make the correction, and a re-evaluation will be conducted.

3) Gather evidence of houses in neighbourhood

You can research 5 to 10 homes that are comparable in size and value to your house in the neighbourhood. Check the price at which they have been sold. You can also check the cost of comparable houses in real estate sites and have the pictures of the houses with the price and size. If your house has been overvalued, you can thus build your case and request a review by the assessor.

4) Do not build or add on to house

If you make any structural changes to your home, there will be an increase in the tax bill. The property tax bill is directly related to the value of your home. If you add a new bedroom, deck, porch, swimming pool, or any permanent fixture in your home, your tax burden will be increased. You can investigate the cost of a new addition in terms of property tax before construction from your local building and tax department.

5) Appeal yourself

You should appeal yourself instead of seeking professional help, as third-party experts such as attorneys, appraisers and consultants charge fees up to 50% of the first year’s reduction. Moreover, some appeal boards are sympathetic towards homeowners who represent themselves.

Investment Property

Tax Depreciation for Investment Property

WHAT WE DO CLAIM
In the 2011-2012 financial year, the most recent period Australian Tax Office stats are available for, more than 623,000 Victorians made deduction claims on rental property expenses. The most common were for council rates, 564,890 claims, water charges, 539, 890, insurance, 476, 055, interest on their loans, 474,375, property agent fees, 443, 430, and repairs and maintenance, 437, 625. Less commonly claimed were legal fees, 15, 630, pest control, 19, 575, and cleaning expenses, 62, 835. H&R Block regional director Frank Brass said many property owners were aware of most of the things they could claim – but there were gaps.

WHAT WE DON’T CLAIM
Most property investors probably were not claiming everything they could be, according to Mr Brass. “Part of it is it’s so difficult to know what sort of records you need to keep and people just give up on trying to keep them,” he said. “(And) they are scared of doing the wrong thing.” But there is no reason to be. If your records, receipts and invoices are in good order and even if you’ve prepared them yourself, so long as you have done it to the best of your ability and are not being fraudulent, then the tax office is generally understanding, Mr Brass said. He also noted you could claim a fifth of your borrowing expenses for the first five years after you bought.

This compensates stamp duty and legal expenses charged on the mortgage. Meanwhile, Bradley Beer, the managing director at BMT tax depreciation specialists, estimated between 70 and 80 per cent of investors were not getting the maximum return on depreciation claims. “The average first year of deductions for a first full year of owning a property is about $10,000, and over 10 years it’s about $7000 per year,” Mr Beer said. He described depreciation claims as a way of having the value of wear and tear on the structure of your property accommodated by the tax office. “The building is wearing out, even if the property is gaining value,” Mr Beer said. To get the most out of this you would likely need to see a quantity surveyor – and it’s not just new properties that can make claims. “If you bought a house 10 years ago and five years ago spent $100,000 on a renovation, there are things in there that will still be depreciating, even if you have missed the first five years,” Mr Beer said. Plus you can claim from the moment you rent it out, Mr Beer said. The same applies if you buy a renovated property.

WHAT TO WATCH FOR
Mr Brass said many people were caught out when they redrew against the equity in an investment property for personal use, and did not adjust the amount they claimed for on their interest.

“You are no longer able to claim the full interest on the loan,” he said. “And what has caught people out for many years is they don’t think to apportion the interest.” There are instances where a couple may buy a property in both their names but have one of them make the tax claims and Mr Brass noted people have been caught out by this.

“You need to handle the tax side of the property according to the names on the title,” he said. He also said that if you were claiming depreciation, those claims would be returned to the Government when you sell the property and added to your capital gains tax payment. For holiday home owners it is important to remember you can only claim against them as an investment when you actually rent them out.

If you are planning to sell, the waiver to capital gains tax only applies to your principal place of residence for the time you have lived in it. The 50 per cent reduction to the tax only applies if you have owned the property for more than 12 months.

CLAIMS TO CONSIDER

– Advertising for tenants;
– Owners corporation fees;
– Gardening and lawn mowing;
– Interest on loans;
– Quantity surveyor’s fees;
– Building materials including concrete, floorboards and tiles can be claimed as
depreciations;
– Carpet, garbage bins, mechanised doors and blinds can also be claimed as they age;
– Apartment and unit buyers can potentially also claim against common areas;
– Travel expenses for property inspections;
– Insurance;