Real estate investors who have used rental properties could miss out on significant depreciation tax deductions.
An analysis by BMT Tax Depreciation found that approximately two-thirds of used properties had undergone some form of expansion or renovation in the past three years.
BMT Tax Depreciation CEO Bradley Beer said many real estate investors are unaware they can claim depreciation on older used properties.
"In November 2017, the government changed the way investors demand the depreciation of plant and equipment assets – in particular, the depreciation of plant and equipment assets. previously used factories and equipment can no longer be claimed, ”Mr. Beer said.
“This has led many investors to misunderstand the changes and not claim any depreciation at all – missing out on what could be thousands of dollars in return at tax time. "
However, it is important to note that under the legislation, the capital works deductions available on the structure of a residential property built after 1987 are not affected.
Mr. Beer stated that these properties accounted for 85-90% of the depreciation claims. This means that owners who renovate old investment properties can claim capital works deductions and depreciation on newly installed plant and equipment assets
"Let's say a property was built in 1980 and the new owner bought it as an investment in 2021 so neither the capital works nor the deductions for Depreciation of plant and equipment is only available on the original structure, "he said.
"However, if it has undergone any form of structural renovation since 1987, even by previous owners, deductions for capital work might be available – in addition to all deductions related to facilities and newly added equipment.
Mr. Beer said it is crucial that investors perform physical site inspections to ensure that every addition or renovation is identified and evaluated by a specialist.
"Some renovations and additions are difficult to identify and see the extent of work, so investors in older properties shouldn't rule out depreciation up front," he said.
“Rather, contact a specialist who will find deductions on renovations made that will increase the annual cash return. "
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Photo by Milivoj Kuhar on Unsplash.
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