Did you know? Property investment offers tax benefits!
Have you ever wondered how investment property can actually help you reduce your tax liability? It’s a powerful strategy that can have a significant impact on your financial well-being. Let’s explore how it works.
Property Investment and Tax Benefits
Here’s where property investment comes into play. The rent you receive from a property increases your taxable income, but the expenses associated with holding the property, including valuable depreciation, are tax-deductible. This results in you receiving a tax return.
Let’s put this into practice with an example:
You earn $100,000 per year.
You own an investment property worth $600,000 with a $540,000 mortgage.
You rent the property for $550 per week (or $28,600 per year).
The rent adds to your income, making it $100,000 + $28,600 = $128,600. However, your deductions, including interest and bank fees, rental management fees, insurance, rates, maintenance, and depreciation, total $50,517.
The Tax Benefits in Action
Your deductions bring your taxable income back down to $78,083 on paper in the eyes of the tax office. This means you’re due a refund!
Calculating the tax, someone earning $78,083 would fall into the 32.5% tax bracket, resulting in a total tax paid of $15,844.
So, if you paid $22,967 tax (on $100,000) and should have only paid $15,844 tax (on $78,083), the Tax Office owes you a $7,123 refund!
By investing in property, you not only build wealth but also optimise your tax situation. This additional income from property can be your “fun money,” allowing you to enjoy the finer things in life while maintaining financial stability.
Remember that tax laws can change, so always consult your accountant before making financial decisions based on tax benefits.
Join us next for more information about why you need to invest in property to change your financial future.
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