As an owner of Investment Property, you may have a number of questions about the welfare of the Property and your pocket.

As you keep your Property in a semblance of order with certain Property improvements, a question must have crossed your mind: can I claim Property renovations as tax deductions?

If you are considering how to get a tax break for the money spent on Property improvements, there are many possible answers.

Common examples of Property improvement are:

  • Installation of air conditioning
  • Replacement of the roof (as opposed to repair)
  • Addition of a sunroom

You cannot deduct the entire  cost in the same year you spend the money but you can depreciate various improvements over different time periods. However, in the event that you sell your Property, a well-kept list of expenses may result in a reduction of taxes at that time.

Repairs versus improvements

There are two categories of money spent on your Property, according to the tax office: the cost of repairs vs the cost of improvements. The cost of capital improvements is added to the “ cost base” of the Property.

What is a cost base? To determine the amount of profit, you subtract the cost base from the sales price.

Also, there are no strict rules concerning the list of qualifying  features. You can add to the cost of certain additions to the Property, for example:

  • Swimming pool
  • New central air-conditioning system
  • New roof
  • Extra water heater
  • Storm windows
  • Property security system
  • Intercom

To find out more about your tax situation please contact Cantor Accounting on (02) 9411 1134.