Renting out your principal residence

None of the expenses associated with your home are tax-deductible but if you decide to rent it out, the situation regarding tax, changes.

When you rent out your property, the net rental income needs to be declared in your tax return.

You will be able to claim costs like rates, water and non-cash costs like depreciation.

If you have a mortgage, you are limited to claiming interest on the loan value before any other drawings, which is the balance of the loan that was originally used to buy the property.

When you sell the property it becomes a taxable asset and you will need to calculate gain made on the sale, but the gain is reduced based on how long you used it as your home.

If you rent out part of your home, for example, one or two rooms, you will still need to declare your rental income and deduct a proportion of the expenses depending on what percentage of the property is rented out. You will also pay some capital gains tax when you sell the property.

RealRenta recommend investors obtain financial advice specific to their situation before making any investments or decisions regarding their finances.

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Jason Gwerder
Friday, 22 May 2020

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