Interest Only Home Loans
Looking to maximise your tax benefits?
One of the reasons property investing is attractive to people is that there ar currently a number of tax benefits that may improve the return on your investment.
Deductions
There are a number of costs associated with owning an investment property that you may be able to claim as a tax deduction. You may already realise that the interest payments and fees of the loan may be deductible, but other costs may also be as well. It’s a bit of a moving feast given state and national legislation have been changing, so please check in with your accountant or financial adviser to find out more about what you may be able to claim, as these items may well add up to a valuable saving on the cost of your investment.
Negative gearing
When your costs of owning your investment property are greater than the income you get from rent, you may be able to ‘negative gear’ your investment. This is when the loss you have from owning the property is offset against your annual income, reducing your taxable income and potentially providing you with tax savings.
Capital Gains Tax
A property may increase in value over time. When it comes to selling your investment property, any rise in value from when you bought it is called the ‘capital gain’. The costs of buying and selling the property are subtracted from the gain, and what’s left is added to your annual income. Which means capital gain is taxable.
The good news is that a profit is a profit (even if it’s taxed) and if you’ve owned the home for more than 12 months you may be able to claim a 50% discount on the gain.
Obviously these are very simplistic descriptions of the potential tax benefits, and you should always speak to a tax expert to understand the tax implications of owning an investment property.