i wanted to ask , lets say i earn $50,000 a year and bought a $300,000 property,
i have to pay $1500 a month to the bank, and only getting $1000 worth of rental income. can i get my $6000 back at tax time?
Tax question with investment homeloan
kurupted on 09/10/2014 - 19:55
Last edited 09/10/2014 - 20:00
Last edited 09/10/2014 - 20:00
Comments
You get your losses subtracted off your taxable income.
So theoretically you have a $6000 loss and you earn $50000, then you pay the tax on $44000
what happen if i were to lose my job? no income lol
Profit!!
so its like a free house
If you were a company, you may get to use the losses to offset future income. No idea about an individual scenario, though,
If you lose your income, your rent will not cover your loan repayment. You may be forced to sell if you do not have any cash reserves.
Then you sell the house as you can't afford to pay the extra $500 that needs to keep the mortgage repayments. Otherwise you could increase the rent to cover the full cost of mortgage repayment.
Otherwise you could increase the rent to cover the full cost of mortgage repayment.
You'll have an empty house. No tenant is going to take an instant 50% increase in rent
The higher your income the more tax you will get back
really? not the other way around?
More income means your in a higher tax bracket, so instead of 30% of $6000 back you get 40% of it back. Its also an effect method of dropping a tax bracket if your just over it
No it's it not like a free house. To have a $6000 loss your expenses must exceed the income derived from the property. The thing to remember about negative gearing is… It's negative!
Without the house, you would pay tax on $50,000(Income tax to pay is $7,797).
With the house you would pay tax on $44,000(Income tax to pay is $5,847).
A difference of $1,950(6,000x32.5%). You only get 32.5% back of that $6,000 loss as you're in that income tax bracket.
https://www.ozbargain.com.au/user/136601
Lose job, no income, no house, no money. Bad credit rating. Penalty interest in future.Your question ..have to pay $1500 a month to the bank, and only getting $1000 worth of rental income. can i get my $6000 back at tax time?
Have you identified what the $6000.00 is? Is your loan is principal and interest. If so each payment pays of some of the loan. If it is interest only then that is a different matter. To be continued below - lagging internet.
Lose job, no income, no house, no money. Bad credit rating. Penalty interest in future.
have to pay $1500 a month to the bank, and only getting $1000 worth of rental income. can i get my $6000 back at tax time?
Have you identified what the $6000.00 is? Is your loan is principal and interest. If so each payment pays of some of the loan. If it is interest only then that is a different matter.
Every now and we should consider the core principals.
Income - anything that you have earnt , acquired, been given, won (professional golfers not lotto winners) and many more or less as defined by the tax act.Tax deductions - any legitment expenses that is allowed by the tax act for the earning of the income.
Investments are there for one reason - to create wealth NOT JUST A TAX DEDUCTION, !!
Tax rules change all the time, even after the tax department have said one thing or a tax claim approved then disalowed. Me, I would never buy a tax deduction.
That is a byproduct of the transaction wether it is freehold, shares, movies (ha ha ha done that, done done'd), international investments, exotic investment, trees. My rule never invest in 'schemes that grow things unless it is a proper farming enterprise with owned or long term leased land - look at pine plantations, emu farms, alpacas, steel wool sheep - the latter or something similar was an investment scam by the proction authority to see how gullible we the public are. AMP did own large cattle stations.
Sh*t happens, hard to protect against loss of job, but talk to providers of finance and your advisers you may use, accountants, financial accredited planners, insurance brokers and your self. Noel W. In his articles in papers suggest set aside 2 years income (how to do this today in today's hurry up world if known would make one wealthy).
Some things to look at, What you will do if you have a living death, TPD. Or a tempory liveing death ie heart attack, stroke (reading this) cancer, loss of legs(as happened to a friend of mine and his insurance paid out to him 1mil - not a good way to get money). I don't want to rely on centrelink whose rules care so much and (ha ha ha which micro L government did we vote for), I don't want to move in with Mum and Dad, great to visit but can't live there any more.With the stricter RBA property investment rules it may be a good idea to talk to 1. A number of bankers 2. An accountant not just a tax agent 3. Financial planner - say 2, One from the most the bank that you consider gave you the most favourable interview/s and one CFP .4. Insurance broker building, loss of rent, land lord insurance and whatever a good broker can offer - ask what is not covered to each consultant/seller and last of all Mum/Dad or equivalent.
yes i totally didn't know that it only counts the interest paid and not principal. im only starting to read up on home loans. and wanted to buy an investment home in the near future. thanks for answering
I strongly suggest that you go see your accountant. Judging by your query(ies), you are a novice at investment property/income tax/negative gearing.
End of the day, if you "are out of pocket" on an investment property, it means that you will be contributing to the shortfall; regardless of the negative gearing. In my case, I have learnt the hard way and now have completely scaled back my property investments.
Everyone has different risk and investment profiles…my 2 cents.
You cant get $6000 back but you can take that $6000 from your taxable income, provided you setup correctly