Tax Depreciation Report: Maximising Deductions on Your Investment Property
If you have invested in real estate, you should plan for the preparation of a tax depreciation report for your property. This document is designed to allow investors to reduce the total payable tax through deduction claims. In general, the tax depreciation report compiles financial information on the original value of the property by calculating construction and furnishing costs. Moreover, the schedule determines the gradual loss of value to natural ageing and wear. Here are some essential tips for preparing your tax depreciation schedule to maximise the financial benefits.
Review the Procedure
You should understand the process of acquiring a tax depreciation report for your investment property. Keep in mind that incorrect preparation could attract scrutiny from taxation authorities and subsequent auditing. If anomalies are detected in the valuation of your property and the depreciation, you will be vulnerable to serious penalties like fines. Therefore, check on the tax laws for investment property and review the details of depreciation valuation each year in case of changes. In general, preparing the report will involve an onsite inspection of the current state of the investment property and a review of past construction and purchase information. These details will provide an estimate of the historical and current real estate value.
Know the Claim Options
Tax depreciation claims are categorised into the capital structure and plant and equipment costs. Most buildings are eligible for a full tax depreciation deduction, but limitations can apply to old structures. Usually, an investor can claim a capital structure deduction for forty years, starting from the completion date of the original construction. If your building is eligible, you can claim for both the capital structure and incorporated assets like plant and equipment. The capital structure deduction takes into account the construction costs and the structural elements like concrete and stones. The plant and equipment claims will include losses incurred for all removable depreciable items like appliances and furniture. If your structure is old and not eligible for capital structure deductions, you can still claim on purchased equipment.
Choose a Professional
The tax depreciation schedule should be prepared by a qualified and certified professional. The calculations involved in the assessment are complex and require extensive knowledge of the construction. Therefore, you should engage a quantity surveyor to prepare the report for your investment property. This document will be submitted to your accountant when filing the tax returns. Where possible, choose a firm that can provide comprehensive quantity surveying and tax services.
Talk to a finance company if you need a tax depreciation report.
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