Top 5 Mistakes Investors Make at Tax Time

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Top 5 Mistakes Investors Make at Tax Time

It’s the time of the year that most property investors dread: tax season.

The end of the financial year is fast approaching, so buckle up, grab your calculators, and let’s dive into our list of the top 5 mistakes investors make so you know what NOT to do at tax time.

1. Not Seeking Professional Tax Advice: Number one on our list (by far) is not seeking professional tax advice. Tax laws are complex and are ever changing, so it’s crucial to consult with a qualified tax professional or accountant who specialises in real estate in order to maximise your return.

2. Failing to Keep Accurate Records: The second biggest mistake investment property owners make is not maintaining accurate records. Keep track of all property-related expenses, including repairs, maintenance, and property management fees. Accurate records will support your deductions and provide evidence in case of an audit. Our suggestion: Create a folder for each property you own and save everything related to your investment in this folder as soon as you receive a bill or invoice.

3. Missing Deductible Expenses: Property owners often overlook deductible expenses, such as property taxes, mortgage interest, insurance premiums, and depreciation. Make sure you have a good tax professional on your side so that you’re aware of everything that you’re entitled to deduct. If you travel to your rental property for maintenance, inspections, or other business-related purposes, the associated expenses can often be deducted. Keep track of travel costs as this can significantly reduce your tax burden.

Examples of expenses you might be able to claim include:

  • Accountant fees, bookkeeping fees, and fees for accounting software
  • Insurance premiums such as building, contents, public liability, and landlord insurance
  • Interest expenses on the loan amount
  • Mortgage insurance, treated as a borrowing expense
  • Quantity Surveyor report for claiming Capital Allowance and Depreciation 

4. Neglecting to Document Rental Income: For property owners who rent out their properties, it is crucial to report all rental income received during the tax year. This includes rent payments, security deposits, and any additional income from amenities or services provided.

5. Ignoring Depreciation Opportunities: Depreciation allows you to deduct the cost of your property over time. Many property owners fail to take advantage of this tax benefit. To maximise your tax return we always recommend our investors to order a tax depreciation schedule with a quantity surveyor.

Tax time can feel like a never-ending rollercoaster ride for property owners, filled with twists and turns. The EOFY deadline is June 30th, so make sure you avoid our 5 most common mistakes when submitting your return, and as always, reach out to the team at PropHero if you have any questions, we’ve got your back!

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