Tax Tips for Landlords

Tax Tips for Landlords

Tax Tips for Landlords

Investing in rental property is a great option to create wealth or generate an extra source of income. It guarantees regular rental income, and can generate good returns in the long run if the value appreciates. That, plus an assortment of tax benefits, has made real estate the preferred investment choice for many people.

Even so, before you commit your resources to the industry, it is paramount to understand some things. There are two dimensions in which you can invest in property. You can either be a direct or an indirect investor. Direct investment entails committing your funds directly as an individual buyer. In contrast, indirect investment involves a property investment scheme where you invest with others investors and earn a percentage of the income generated.

No matter the direction you decide to take, you will still be obligated to pay tax. Each option comes with its fair share of tax responsibilities. It is crucial to familiarize yourself with those obligations so as to pay what is reasonable and make the necessary claims.

There are risks involved with any investment, and real estate is no different. Understanding the risks and the impact they would make is healthy for any investor and can help make an informed decision.

If you need help making the right investment decision, professionals like Sapphire Capital Investment can help you understand vital details about different investments and their tax obligations.

This article highlights crucial tax tips for property investors when filing tax returns.

Know What to Declare and Claim

Before you claim any deductibles, you must declare the income generated for the whole year. For property investors, the primary source of income is rent. However, if you have other sources, it is paramount that you declare the amount you received from such sources. It may be from insurance payouts, bonds, and any lump sum received concerning your rental property.

Knowing what you can claim can be the difference between saving vast amounts of money and overpaying on taxes. There is a broad array of deductions that property investors can claim. It is up to you to get a comprehensive list of what you can claim from your accountant.

You cannot claim any expenses accrued from personal use of the property or those settled by the tenant. Also, you should not claim any costs incurred during the purchase or selling of the property.

Book Keeping

Investing in rental property is like any other business where the investor expects to generate revenue and make profits. Proper documentation helps to keep essential records and helps in evaluating the performance of your investment.

Take note of your income and expenditure and keep the relevant documents to support the figures. That includes receipts, invoices, contracts, and any other relevant documents. Bank statements are also crucial accounting documents when preparing financial statements.

If you manage your own property, hiring an accountant can help you maintain proper financial records. An experienced tax accountant can also provide helpful guidance on the deductibles you can claim when filing your tax returns. Their familiarity with the latest tax trends and principles can also be valuable to your venture.

Proper documentation helps when claiming tax deductibles. You can provide the necessary evidence to support your claims. It makes the process easier and a bit straightforward.

Have a Team of Experts

Starting on the right foot can help you save significant amounts and attain optimum returns on your investment. Build a team of qualified people you can trust and rely upon for the right advice. That includes a specialist in capital investments, an accountant, an attorney, and a property strategist. Having such a wealth of knowledge around you means you will always make informed decisions regarding your tax returns, mortgage, and loans.

It might cost you some extra money, but the results will be worth it in the long term. Surround yourself with a team of experts right from the beginning if you want to succeed in property investment and achieve your investment goals.

Capital Gains 

Capital gain is what you generate from the sale of your property. Whether positive or negative, you should report all capital gains when filing your tax returns and pay tax on the amount you made. You can offset capital gains against trading or losses incurred within the year to reduce the amount and tax payable.

You can also minimize the amount generated by disposing of property and assets whose value has diminished and with no signs of recovery in the foreseeable future. You will get a discount of 50% for any property owned for more than a year. That is a significant amount to save; thus, ensure you get your timing right before selling.


You can claim a tax-deductible on the amount of depreciation accrued by your property. Wear and tear is unavoidable and can help property investors save a reasonable sum when paying tax. Before renovating your property, you can have a quantity surveyor examine it and tag a value. All repairs and items disposed of are deductible in the same year.

It is important to note that the amount deductible varies between old and new properties. For new constructions, you will get double the amount you can claim for used property. As such, your property portfolio may come into play when claiming depreciation.

Loan Interest

If you took a loan to purchase the property, you claim the interest you are paying. To help you claim the whole amount, you should maintain a separate account for the loan from your transactions. Mixing up the two means you might need to clarify the expenses associated with your property investment.

In Conclusion

When it comes to tax, you need to be well informed to make the right decisions. As an investor in rental property, there are many tax benefits you can enjoy but if you are aware of them. Consulting professionals can provide helpful insight into laying down the proper structures for tax efficiency. It also helps keep costs low and get maximum returns from your investment.


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