How to Maximise Your Tax Refunds With Real Estate | FHOC
Investing in a new home is a prime opportunity to save capital over the long-term. Many people buy homes with the intention of paying off their mortgage years down the road. Some people keep homes that they can either live in forever, getting rid of the expensive cost of renting apartments. Others decide that they would rather rent out their homes to others, freeing up the opportunity to invest in even more real estate.
Regardless of your preference, a home is a valuable asset. A home can be rented indefinitely, ensuring a constant stream of steady income. Alternatively, a home can often be sold for double the original price, simply with the passage of time. Renting and selling are especially useful for properties in high-value neighbourhoods, where prices keep increasing. Your home allows you to build wealth with no additional input on your part.
Yet one of the things you might not realise is that a home is also a great opportunity to grant yourself some tax breaks. When you file your tax returns this year, it is important to know what steps you should take to make sure that you can claim your refund properly:
- Keep ownership of your home or property for at least 12 months. This ensures that you can keep your capital gains tax as low as possible.
- Claim all of your property expenses. Figure out early on which expenses are legal for you to claim, as everyone who invests in property has a slightly different situation. Often, these expenses include cleaning and maintenance fees, property repairs, various utility expenses, charges and fees for borrowing, pest control, mortgage interest, and even property related travel.
- Factor in income related to renting. If you have decided to rent your property out, it’s important to include that income on your tax forms. Investors are expected to claim rent in relation to their percentage of the property.
- Prepay fees on your home in advance. If you are renting your home, it is possible to pay the interest a year in advance. This reduces your current income and can help you get into a lower tax bracket. Note that this is only a viable option for people who have made a substantial amount of income on their homes.
First Home Owners Centre (FHOC) can help you plan for your real estate taxes and suggest ways to save on home ownership. Contact us today to discuss your tax refunds.