How can I derive maximum benefit from maintenance and upgrades that I have made to a rental property? Can I declare the expense for the current tax year and also declare it for Capital Gains Tax purposes when I sell the property? Is there another way in which I can benefit from this expense?
Repairs and maintenance expenditure is allowed as a tax deduction. However, money spent on renovations/improvements is regarded as a capital expense and this is not deducted but added to the cost of the property in order to reduce capital gains tax when you sell it one day. Therefore, you need to decide the nature of the expense and treat accordingly. It will either reduce current year taxable income or reduce CGT later (but can't do both!).
Renovations/improvements would generally increase the income earning capacity of the property - for example, adding an additional room. While repairs/maintenance expenditure would be to fix something that has broken and therefore simply restore to its previous condition.
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