This week we're joined by Amanda Quill to go through how to prepare your first year of tax returns for your rental property.
Just bought your first rental property or added another to your collection? Prepping your first property tax return can feel like a headache waiting to happen. But, with a good plan and a bit of order, it’s easier than you think.
Filling out a tax return for your property can seem like a maze, no matter how many properties you own. This guide will walk you through it step by step, so you can get your tax return done smoothly with your accountant.
Getting Ready for Your First Year of Rental Returns
Being organised is half the battle when dealing with tax returns. Here’s what you need to do:
1. Dig Up the Paperwork for a New Purchase
If you’ve bought a new property, make sure you have your settlement statement and a code compliance certificate (CCC) if it’s a new build. These will have important info for your tax return.
2. Got a Tax Break? Prove it!
If your property gets any interest tax breaks, like social housing or converted dwellings, have your proof ready. This could be documents showing the property’s status or its conversion.
3. Track Any Changes in Property Use
If you used to live in the property and now rent it out, jot this down. This info can make a big difference to your tax obligations and help your accountant.
4. Set Up a Special Bank Account
Make life easier by having a dedicated bank account just for your property’s income and expenses. This is a no-brainer if a company or trust owns the property.
5. Hold Onto Those Receipts
Keep receipts for all costs related to your property. This is especially key for big expenses or those that might not seem property-related. As a rule of thumb, keep any receipts for stuff that costs more than $500.
6. Grab a Valuit Report
A Valuit report, or depreciation schedule, shows how the value of stuff in your property goes down over time. You can use this info to get deductions on your tax return.
7. Keep Records of Inspections and Repairs
Make sure to keep track of any inspections or repairs you pay for, including any travel costs (mileage). You can deduct these costs.
8. Know What You Can and Can’t Claim
You can’t claim for time spent fixing your property – that would count as personal income. But you can claim for phone costs, travel, and home office expenses that relate to managing the property.
Remember, the aim for your first property tax return is to keep everything neat and tidy. The first year might feel like a juggling act, but with this guide, you’re more than ready. If you’re ever unsure about anything on your property tax return, don’t hesitate to ask a tax professional. They can offer you expert advice suited to your situation and make sure you follow all the tax rules. Good luck on your adventure in property ownership and management!
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