I am trying to rent out a house built in 1977 and the Real estate company suggested I pay to get a depreciation schedule prepared.
The house is as stock-standard & boring as they come, and being 40 years old I’m not sure there is anything left to depreciate.
Is it worth paying for this report for the tax deductions? What sort of things could still be depreciated after 40 years?
Yes. Fixtures like blinds, light fittings, air conditioners, water heaters, carpets, stoves, dish washers etc. all contribute. As does anything spent last time it was renovated, assuming more recently than 40yrs.
I was surprised what the schedule added up to for the older property I had one done for.
The roof & water heater are <5 years old, but I have no idea what they cost (previous owner did it).
Blinds are new, but would barely total $200 total - got them from eBay sales.
Nothing else has been done to the place, it's a very basic house with minimum features. I'm just concerned the cost of the depreciation schedule would be more than any tax deduction savings.
while older property has less to claim this is fact
does not mean you cannot claim anything
things that were done by previous owner still count
people doing the report will determine cost in the event you are unsure/dont know
also the cost of the report itself should be tax deductible
all this said your circumstance may be different
so talk to your tax adviser to be sure
Up to you, but the couple of hundred I spent for an online estimator's report was well worth it. They will estimate costs like roof replacement based on size of the building.
yes - and get it done before the end of this financial year
you MIGHT be able to claim some stuff this year…….
There are two costs involved in claiming depreciation. 1) Cost of getting depreciation schedule done ($400-$800). 2) All the depreciation claimed is added to your capital gain when you sell property. However, you will realise that often (though not always) tax saved by claiming depreciation now will be higher than both costs above put together. Also, remember that #2 is future money while by claiming depreciation you are saving money NOW. Hope this summarises everything.
To clarify, all depreciation claimed reduces your cost base (your purchase cost) therefore if you buy property for say $400K, sell for $500k but made $50K depreciation claim. Then your gain isn't $100.
Your cost is now 350K, selling price $500K and therefore capital gain of $150K.
Why not ask the question here AMA - Round Two - Tax and Tax Return Questions - Ask Me Anything - GO!
If you check Round 1 as well you might find that your question already answered.