Hi All,
I am thinking of buying my first investment property and I would like to make sure I do understand tax saving benefit and negative gearing correctly.
I would like to present a sample scenario for the first year (negative gearing and claiming interest expenses).
Gross Income: $100,000
Income tax: $24,950 (approx. 25'000)
IP Price: $333,000
Initial pay: %10
Loan amount: $300,000
Comparison rate: %7
Mortgage: 30 year
First year:
Monthly payment $1996
Principal paid (yearly) : $3047
Interest paid (yearly) : $20903
Total paid (yearly) : $23950
Rental cash flow:
Weekly rent: $350 (yearly $18,200)
Yearly rates, renovation, insurance: $5,000
Yearly net cash flow: $18,200- $5,000 = $13200
For the first year: $13200 - $3047 (principle) = $10,153 (Interest paid by tenant)
Rest of the interest paid by IP owner: $10,750
Adjusted income for tax purposes: $100,000 - $10,750 - $10,153 = $79,097
Income tax on $78,297 = $17,280
Total tax back: $24,950 - $17,280 = $7,670
I appreciate your comments/opinions.
Cheers,
Ali
I am thinking of buying my first investment property and I would like to make sure I do understand tax saving benefit and negative gearing correctly.
I would like to present a sample scenario for the first year (negative gearing and claiming interest expenses).
Gross Income: $100,000
Income tax: $24,950 (approx. 25'000)
IP Price: $333,000
Initial pay: %10
Loan amount: $300,000
Comparison rate: %7
Mortgage: 30 year
First year:
Monthly payment $1996
Principal paid (yearly) : $3047
Interest paid (yearly) : $20903
Total paid (yearly) : $23950
Rental cash flow:
Weekly rent: $350 (yearly $18,200)
Yearly rates, renovation, insurance: $5,000
Yearly net cash flow: $18,200- $5,000 = $13200
For the first year: $13200 - $3047 (principle) = $10,153 (Interest paid by tenant)
Rest of the interest paid by IP owner: $10,750
Adjusted income for tax purposes: $100,000 - $10,750 - $10,153 = $79,097
Income tax on $78,297 = $17,280
Total tax back: $24,950 - $17,280 = $7,670
I appreciate your comments/opinions.
Cheers,
Ali