I have a rental property that I would like to raise and build in under an additional living area to maximise the rent and value of the property. I don't quite understand difference in "rapairs and maintenance" and improvements. Now all the interest is claimed as a tax deduction, would interest on an improvement be able to be claimed?
We expect the reno to be 100-150K as would need to lift the house to make legal. Currently the house is worth $650K and this would not be over capitising in our area.
I would expect the house to improve with our renos respectivley.Cheers ANita
Hi Anita,
Yes, the interest on money borrowed for capital improvements will be deductible.
The capital improvements will have to be depreciated, rather than written off, much like you would depreciate a new stove or dishwasher.
Anitav wrote:I have a rental property that I would like to raise and build in under an additional living area to maximise the rent and value of the property. I don't quite understand difference in "rapairs and maintenance" and improvements.Anita
This is a grey area of tax law.
If you repair an item that back to its original state when you originally purchased a property it is a repair
If you repair an item in its entirety like say replace whole roof or replace whole carpet it is deemed an improvement
If you do work that improves the property beyond its original condition when you purchased it it is an imrpovement.
If you renovate and put in a living area below it is improving the property beyond its original condition when you purchased it.Now something to consider
Iff you claim building depreciation on the renovation the depreciation is going to be subtracted off your cost base. So if you did 100,000 renovation as building costs and claim a portion each year the renovation cost base of $100,000 comes down each year.
So in the future it means more capital gains tax.
as CG = future value – cost base
You must be logged in to reply to this topic. If you don't have an account, you can register here.
