Tax depreciation is a great way to reclaim the expenses of a fixed asset by a deduction in tax. It is mainly assumed that the expenses incurred by the depreciation of a fixed asset can reduce the taxable income a homeowner might have to pay.
What kind of Property can be Depreciated
The following property can be depreciated
- All the fixed assets a homeowner might have in their homes. These include things like electrical appliances, carpets, curtains and certain household items. However items which last less than a year cannot be depreciated.
- The second kind of asset depreciation is within the structure of the building where a homeowner might live. This includes wear and tear incurred on the driveway, the stone and the mortar on the walls etc.
- One thing which needs to be kept in mind is that the land on which the home is built does not come under depreciation. It is assumed that a land is non depreciable because it yields its value over a period of time.
- A property is considered to be depreciable till the time it’s useful or till the time it stops being useful.
- Depreciation cannot be recorded on an item which you have purchased but haven’t used as yet.
What Time Does Depreciation end?
- You cannot claim depreciation on an asset which has stopped being useful or has completed its shelf life.
- An asset which is sold off can’t be depreciated
- Once you stop using an asset you can’t claim depreciation for it.
The Advantages of Depreciation Tax
Make sure you aren’t missing out on rental property depreciation.
- Depreciation is the only tax which is considered non- cash, which is actually a good thing.
- An asset for which you claim depreciation tax provides home owners with quite a bit of profit. Savvy homeowners save thousands of dollars in a year if they are claiming depreciation tax for their property.
- Though most people believe that determining a depreciation method can be a big headache it can prove to pretty useful. Employing the right tax surveyor for the job can help save money in the long run.
What Should I do to Calculate Depreciation Tax?
If you own a rental property that is making money, you may be able to claim tax deductions with depreciation tax. Since calculating depreciation is a complex job and is done well by experts only, you can contact a well known quantity surveyor to take a note of your depreciable assets.
However you need to provide them with the following information
- Keep a complete note of all the depreciable assets in your homes. For example when a fixed asset had been purchased
- The actual cost of an asset, including installation and shipping costs.
Keeping a complete record can help homeowners determine the exact depreciation to reduce their tax liability.
Hiring a Quantity Surveyor
Keep the following things in mind when hiring a quantity surveyor
- Make sure that the quantity surveyor is an expert in construction economics.
- They need to be registered tax agents as well.
- The surveyor must conduct a proper assessment of your property.
- They should document all the depreciable items by analyzing and taking pictures.
- Should be able to determine the value of each depreciable asset
- They should create a detailed report on all plant and equipment items which are depreciable. The report normally contains the rate at which the assets can be depreciated.
- Once done the report is handed over to an accountant who would then determine the depreciation tax a homeowner can claim.