As Tax Season begins for the 2020 year, it’s now time to start thinking about getting your rental property accounting and tax obligations sorted.
Below are some simple tips which will help you get sorted for tax time.
Start thinking about tax now
It is best to start planning for tax early. If you are unsure about what you are required to do to comply with your tax obligations for the 2020 tax year talk to us now. As a client you are entitled to advice and assistance with your rental property tax obligations.
Understand what expenses you can claim
It is important to know what expenses you can claim against your rental property income and what you cannot. We have published a brief list of what you can and cannot claim here.
It is important to remember that you will need to be able to produce invoices or receipts to support any expense claims made.
As always, if you have any questions about what you can and cannot claim, please contact us and we would be happy to point you in the right direction.
Chattels depreciation reports
Chattels useful life: Depreciation is an allowance for the reduction in the value of an asset over its lifetime. Each chattel has its own economic life and can be depreciated separately. Some assets may be depreciated over 5 years, others over 10. For example, ovens and blinds have an estimated useful life of 8 years, air conditioners – 10 years.
The IRD provides depreciation rates to use for each chattel type. What it does not give you is the cost value.
Identifying the costs: To maximise your depreciation deductions and to reduce tax at the end of the year, you need to accurately identify the cost of each chattel.
Brand new asset: If you have purchased a new chattel, then the cost will be easy to identify. The cost should be the purchase price.
Purchasing a property with existing chattels: If you have purchased an existing property, then you’re likely to have inherited many assets in various categories – carpets, blinds, stoves, light shades, fences, letter boxes, tv aerials, garage doors etc.
You can do your own chattel valuations by doing research determining correct market value of these items. As long as you’re confident you can justify your calculations in the event of an audit. To be safe and to ensure you maximise all deductions available you should consider getting a professional chattels valuation.
A chattel valuation normally costs around $400 + GST, but the benefit of a professional chattel valuation usually far outweighs the cost. You will receive a full breakdown of chattels, their values and the IRD depreciation rates; which ensures you can maximise your claim. Using a professional also far reduces the risk of penalties in the case of Inland Revenue audit’s and is far more likely to maximise your depreciation claim over doing it yourself.
If you would like to get a chattels valuation completed, we recommend Valuit and you can visit their site here.
Get your records in order
Taking time to get your records in order will help you determine what your tax obligations in relation to your rental property may look like and can also act as catalyst to chase up any other rental property matters you may have to deal with.
Providing good accurate information to us will ensure that we can complete your rental property accounting obligations quickly.
Get your returns completed early
Getting you returns completed early will help position you to take advantage of any tax concessions, reductions in interest rates or opportunity that will present in the property market in the next six months.
We are property taxation experts, contact us for a no obligation discussion about how we can help you meet your rental property tax obligations as part of our fixed fee service.
Get in touch
Get in touch with the experts at Lighthouse Mortgages to get started.