Rental property deductions: what to keep in mind

A high-level guide to rental income, running expenses, repairs and capital costs.

Rental property owners generally report rental income and may claim eligible expenses incurred in earning that income. The timing and treatment depend on the type of cost.

Interest on a rental-property loan may be deductible to the extent the borrowed funds relate to earning rental income. Loan principal is not interest. Rates, insurance and management fees may be deductible where they relate to the rental activity.

Repairs that restore something to its previous condition are different from capital improvements. Initial repairs, renovations and many building costs may need to be treated as capital expenditure and claimed over time rather than immediately.

Keep leases, agent statements, invoices, loan records and evidence of when the property was rented or genuinely available for rent. Get advice where a property has private use, changed use, or mixed-purpose borrowing.