HI
Just want to check if anyone knows whether I still qualify for tax breaks if I rent out my own home?I currently don’t have a mortgage on my own home, but am thinking of taking one out so I can buy a second property. I want to live in this second property and rent out my current house. I can only make it work if I can claim some tax breaks (depreciation, differential between mortage and rent payments etc) and want to check what the situation is in these circumstances?
Any thoughts welcome
GBalfNo sorry. If you were renting the one you buy then you can but you can't legally just dump a mortgage on the first property then claim it.
You can claim ONLY on money that is borrowed for investment. As the money will be used to buy a house you will be living in you can't claim.
That's why people have offset accounts instead of paying down their mortgage. Then you can pull it out and do what you want with it and still claim the loan if you rent it.
Sorry.Gbalf
In essence Catalyst is correct however that is not necessarily the be all and end all.
Is the property owned Jointly ? If so you could look to purchase / sell the share to the other party.
If not you could look at selling the property to a Unit Trust where you hold all of the Units and in this case tjhe interest on the new loan would be fully deductible.
Depending on the relevant State you are in there maybe some Stamp Duty considerations but structured correctly and dependant on the new purchase price / loan amount could be well worth it.
Richard Taylor | Australia's leading private lender
There are tax breaks – you can claim depreciation and other costs associated with the property, but not interest on money borrowed for the new property. But, these tax breaks are unlikely to offset the income generated from the rent and this will mean you will end up paying more tax – while at the same time having a high non-deductible loan on the new house.
This is why it is best never to pay down a loan.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Do you have to move ouy into the new property?
If you can't move your current home to another owner and tax breaks are a must then have you investigated buying the next property as an IP?
THanks for all the comments. My apologies for the delay in replying – in the UK just now so there is a time delay.
Yes, my current home is jointly owned – we managed to buy it outright when we moved to Aus several years ago. It’s in a great location which will have good capital growth so it is worth hanging on to, but for us it is not the right house to live in. We have seen another house we’d like to move to and of course could just sell up and move, but it’s just about possible that we could afford to keep on both which would be great as we’d have an investment property in a capital growth area and a home we actually want to live in.
I was interested in the comments about changing the names on the deeds. My husband is the greater earner of the two of us, so if we were to put this house in his name and then the new property in my name, could that work?
GbalfHi Gbalf
Which part of the UK. Boy from the South myself so give my regards to blighty.
Yes your husband could purchase your share of the property whilst it is a PPOR and then the interest on the amount he raised would be deductible. Admitedly would only be 50% of the current value but better than nothing.
As i say depending on where the property is located will determine whether there is any Stamp Duty payable.
Your Broker should be able to do the numbers for you.
Richard Taylor | Australia's leading private lender
Thank you Richard
What is PPOR? (sorry!)
We are in Queensland
I am in Cheshire and enjoying lovely pub lunches in idyllic historic villages. The sun is shining which puts an unrealisticly glossy glow to the place
Ginnyjust worked out the ppor ta
You must be logged in to reply to this topic. If you don't have an account, you can register here.
