Claiming depreciation deductions on your own home
Home owners can rent out rooms within their house to generate income.
Extra tax deductions become available. Even when family members pay rent, by declaring the rental income in a tax return, a portion of the expenses and depreciation may be claimed as a deduction.
The Australian Taxation Office (ATO) has a preferred method of calculating the proportion of expenses that can be claimed as a deduction under a ruling that sets out the ATO’s general approach of apportionment based upon floor areas. The ruling states that it is appropriate to add the floor area which the tenant has sole occupancy of to 50% of the general living area the tenant shares equally with the owner/occupier. It is necessary to only include general living areas the tenant has access to.
A portion of relevant property deductions can be claimed by the owner including property depreciation; which is a deduction available for the wear and tear on the fixtures, fittings and structure of a building. A portion of other expenses such as insurance, rates and the interest payments made on the mortgage of a property may also be claimed.
Home owners should seek financial advice from accountants and other specialists before renting a room out in an owner occupied house.
BMT Tax Depreciation is dedicated to helping home owners maximise their property depreciation deductions and improving their cash return.
Visit the BMT Tax Depreciation website www.bmtqs.com.au