Pay Your Way: Understanding Tax

One of the main reasons people invest in real estate property is tax relief. Generally, if you have invested in a property that needs upgrades, maintenance, and other expenditure, the government waives some taxes for you. These are laws that have been put in place to encourage investment in real estate property and also cushion investors from losses.

However, these laws don't mean that when you invest in real estate, you smile all the way to the bank. There are still many tax obligations that you have to meet, especially when you invest in real estate. The following are three types of taxes and critical information you need to know before making a real estate investment.

1. Income Tax

You are expected by the tax authorities to pay tax on all income that you receive from your real estate. If you have bought or built rental apartments, you will be required to pay tax from your rental income. Similarly, if you are flipping property, a part of your proceeds goes towards income tax. You might need a competent taxation expert to help you use interest repayments on your loan to offset this type of tax. The tax expert will also show you which other deductions can be exempted when paying income tax.

2. Capital Gain Tax

This only applies to real estate investors who specialise in flipping property. You might also need to pay tax on the capital gains once you sell your residential property. The amount that you pay from the capital gains might vary depending on how long you have owned the residential property and the tax rate. People that have owned property more than a year are eligible for a 50 per cent discount on their capital gain.

3.Land and Property Tax

Land tax is common in all state and territorial governments. It is taxed on the value of the land without any improvements that you may have made on it. Taxation experts calculate this tax based on the value that your land would have if it were vacant. Property taxes are also known as council rates. They are charged by the local government and the municipal council for the maintenance of the communal services.

A competent taxation expert can help you understand all the tax implications of buying, maintaining, and selling property. They will also make sure that you know and fulfil all your tax obligations to avoid trouble with the law and for the success of your investment. Learn more by contacting companies like Anthony Gigacz & Associates Pty Ltd.