Investment property depreciation is a complex topic that can be difficult for property owners to fully understand. Many property owners turn to property depreciation consultants for help in maximising their investment property depreciation. But what exactly does a property depreciation consultant do, and how can they help property owners?
First, it’s important to understand what investment property depreciation is. Depreciation is a way for property owners to deduct the cost of their property over a period of time. This is done by dividing the cost of the property by the number of years it is expected to last. For example, if a property costs $100,000 and is expected to last 27.5 years, the property owner can deduct $3,636.36 per year in depreciation.
However, there are many factors that can affect the amount of depreciation that a property owner can claim, such as the type of property, the date it was placed in service, and the cost of the property. This is where property depreciation consultants come in. They can help property owners navigate the complex rules and regulations surrounding investment property depreciation, and ensure that they are claiming the maximum amount of depreciation possible.
Property depreciation consultants can also help property owners with other aspects of investment property ownership. For example, they can help with cost segregation studies, which cats of their property as personal property, rather than real property. This can result in faster depreciation and larger deductions. They can also assist in reviewing the property and identifying building components that may qualify for bonus depreciation.
Property depreciation consultants can also help property owners with the paperwork and documentation required for claiming depreciation. They can ensure that property owners have all the necessary documentation, such as cost segregation reports and engineering studies, to support their depreciation claims. They can also help property owners understand the tax implications of their investment property, and how it will affect their overall tax situation.
Property depreciation consultants can also help property owners with the sale of their investment property. They can help property owners understand the tax implications of selling their property, and how to minimise their tax liability. They can also help property owners understand the impact of depreciation recapture, which is a tax that property owners must pay when they sell their property for more than they have claimed in depreciation.
Furthermore, property depreciation consultants are experts in the field and stay up-to-date with any changes in tax laws and regulations related to property depreciation. They can advise you on how to take advantage of new tax laws and regulations.
One important thing to keep in mind is that in order to claim depreciation on your investment property, the property must be used for income-producing activities. This means that the property must be rented out, or used in a trade or business. If you use the property for personal use, such as a vacation home, you cannot claim depreciation on it.
Another thing to consider is that some properties are not eligible for depreciation. For example, land is not depreciable, and neither are properties that are considered to have an unlimited useful life, such as a lighthouse. In these cases, a property depreciation consultant can help you understand which of your properties are eligible for depreciation and which are not.
In addition, property depreciation consultants can also assist you with managing your property’s depreciable life. The depreciable life of a property is the period of time over which you can claim depreciation. A property depreciation consultant can help you determine the most appropriate depreciable life for your property, and how to manage it. For example, if you acquire a property that is already partially depreciated, the consultant can help you determine the remaining depreciable life and how to manage it.
Finally, property depreciation consultants can help you keep track of your depreciation claims. Over the years, the cost of your property may change due to repairs, improvements, or inflation. A property depreciation consultant can help you adjust your depreciation claims accordingly. This can help you avoid over-claiming or under-claiming depreciation on your property.
In conclusion, property depreciation consultants can be an invaluable resource for investment property owners. They can help you navigate the complex rules and regulations surrounding investment property depreciation, and ensure that you are claiming the maximum amount of depreciation possible. They can also assist in cost segregation studies, paperwork and documentation, tax implications, and sale of the property. If you are an investment property owner and have questions about depreciation, it’s worth considering working with a property depreciation consultant. They can help you maximise your deductions, minimise your tax liability and save you money in the long run.