How to reduce your tax through negative geared properties

Negative Gearing

The way Negative gearinging works is when your mortagage repayments and property expenses outway the cash coming in from a neagtive geared property.

It sounds bad, but if your someone who at the end of financial year receives a massive Tax bill and you want to reduce this tax bill then Negative Geareing is for you.

If you purchase a Negative Geared Investment Property, it can actually reduce your taxable income, as you can claim back these expenses, through neagative geared investment properties and not have to fork out as much when the tax man comes knocking.

With property investing if your goal is to have Positive Cashflow Properties that produce Passive Income then negative geared properties is to be avoided.

What tax reduction can you claim with negative geared properties?

• 1 Claim 100% of your interest payments as deductions on a interest only home loan repayment, this is why some investors choose an interest only home loan repayment.

You will need to have this neagtive geared property rented out, during the year you want to utilise it as taxable income.

• Other cost deductions can be advetising to get new tenants.

• Garden up keep

• Legal fees

• Maintenance work due to wear and tear.

• Land tax that is associated to that property

Every year, rules and regulations change on how much tax you can reduce. This is why it is important to use an accountant to help reduce your tax according to each years upto date rules and regulations.

• Another great way to maximise your tax reduction is to pre pay your bills.

• Another tax break is property depreciation- in other words the depreciating value on the investment property, this is more associated with the wear and tear of the property.

You will need to arrange depreciation schedules to actually legally claim any tax break through the depreciation to the investment property. The cost involved in getting a depreciation schedule is also tax deductable.

When investors do renovations to an established property it is NOT automatically a tax right off, for example, if you decide to renovate the bathroom when you are able to get a tax reduction is when it is getting used and has wear and tear, this when you are able to claim tax reduction.

Another way to claim a tax reduction for depreciation is, renovations done by the pevious owner, this is why it is important to use an accountant that can help you maximise your savings

Capital Gains Tax (CGT) ~ if you make capital gains or what I like to call (money gains), when it come time to selling, then you will need to pay Capital Agins tax if you made a capital loss, then you dont need to pay capital gains tax, also if you purchase the property and sell it in under 12 months then you will need to pay 100% capital gains tax, but

if you sell after 12 months your capital gains tax can be reduced of up to 50% again to maximise this speak with your accountant.

Hope this shed some light on Negative Geared Investing and it’s benefits to some property investors.

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