Posts made in January, 2015

Tax Deductions for Repairs on Rental Properties Comments Off on Tax Deductions for Repairs on Rental Properties

Tax Deductions for Repairs on Rental Properties

Ever wondered if you should be claiming your rental repairs and replacement expenses as a tax deduction or if they should be depreciated as assets on your tax return?  The following will provide a rough guide and a few examples of when repairs and replacements are treated as expenses or assets (capital expenses), and whether they can be claimed on your tax return. How will the difference between repairs and capital expenses affect your tax return? 100% of the cost of repairs can be claimed as a rental deduction on your tax return in the year that the expense was incurred. However, capital expenses will need to be depreciated on your tax return, meaning that the cost will be claimed over a number of years depending on the effective life of the asset. For example, a hot water system has an effective life of 15 years which means it will be depreciated at 13.33% (200/15) if using the diminishing value method. This means that in the year of purchase for a hot water system costing $1,500, you will only claim $200 ($1,500 x 13.33%) depreciation as a rental deduction on your tax return. Then in the following year you will claim  $173 ($1,300 x 13.33%) depreciation on your tax return....

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