Every year more and more people look for ways to generate a passive income with their money. While purchasing art, stocks and antiques are all popular ways to do this, the best and most proven way to generate passive income is through the use of an investment property. Investment properties are good because they are an extra source of income while also being an asset you can sell or use in the future. However, if you find that your margins are a bit thin on your investment property, then there could be a way to increase them through a tax deduction known as depreciation.
What Is Tax Depreciation?
As soon as you buy something or build something, it starts losing its original value. That is true for almost anything from cars to computers to your investment property. Tax depreciation recognises that because your property is declining in value, you should not be paying the same amount of tax on it that you were when it was new. When you claim tax depreciation, you get a certain percentage of your home's value back in a tax deduction. This can help investment property owners who are struggling to see any return on their investment and allow them to reinvest that extra cash back into the property.
Is There A Tax Depreciation Deduction For Anything Else?
There is another way to claim a tax depreciation deduction for some of the contents in your investment property, but this is a little more complex and harder to get. Generally, to claim tax depreciation on items like a TV or indoor plants, you need the building to be a new commercial business location and to have an inspection by an authorised agent. While you can get a tax depreciation deduction without being a company, it is harder and requires special advice and attention from a financial planner.
How Do I Get This Money Into My Account?
The best way to see an immediate change in your tax status is by hiring a financial advisor who can help you implement these tax deductions. It is not an easy process to go through, and if you get it wrong, you could be claiming deductions you don't actually qualify for, thus opening yourself up to a heavy fine. A financial advisor can prepare the paperwork for you, draft a plan of depreciation long into the future and submit all the necessary applications and forms to get the ball rolling. When you are going to save tens of thousands over the course of an investment properties life this is a small but valuable service.
To learn more about tax depreciation, you can talk to a financial planner in your area.