When is the Right Time to Prepare a Property Depreciation Schedule?
Preparing a property depreciation schedule allows investment property owners to claim for wear and tear deductions on capital works and assets within their property. These deductions reduce the amount of tax paid towards the property, and they can result in significant savings every year. However, new and prospective property investors are often faced with the challenge of determining the most suitable time for preparing this document. Read on to find out the ideal time that you should prepare a property depreciation schedule so as to enjoy tax savings.
Immediately after settlement
The best time to prepare your initial property depreciation schedule is immediately after settlement. This way, you will avoid any disruptions from the previous tenants during the moving process. The quantity surveyor will also be in a better position to assess all the assets within the property after moving in. If you purchase any new assets such as furniture, appliances, and furnishings, they will also be included in the initial depreciation schedule and will be allowable against your taxable income for that tax period.
After renovations and improvements
Any renovations and improvements made to the property warrant the preparation of an updated depreciation schedule. The new depreciation schedule will capture these changes so that you can be compensated for wear and tear against them. Such improvements include constructing an extension, upgrading HVAC, plumbing, electrical wiring, and hot water systems, and purchasing new appliances, furniture and furnishings among others. Any asset improvements that are aimed at improving the value of the property should be allowable against your taxable income.
Contact your quantity surveyor after any significant renovations within the property so that they can assess the value of the renovations and include them in your depreciation schedule.
After property repairs
Property repairs are allowable against the taxable property of a property. If you intend to repair the parking lot and concrete walkways, replace faulty or outdated electrical wiring, repair faulty systems and appliances, or repaint the building after investing in the property, you should include these repairs in your depreciation schedule. However, when it comes to appliances, assess their usable life before undertaking repairs. Sometimes, purchasing new equipment may attract more tax savings than repairing them. Also, if the equipment has reached its usable life, it should be written off.
Ensure you prepare a depreciation schedule after purchasing the property, and update it to reflect any of the changes discussed above. A qualified tax expert can help you assess your assets and determine the best approach to maximize tax savings on property depreciation.
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