Sep 20 2010

Borrowing expenses for Investment Properties

Borrowing expenses for Investment Properties
These are expenses directly incurred in taking out a loan for the property. They include loan establishment fees, title search fees and costs for preparing and filing mortgage documents – including mortgage broker fees and stamp duty charged on the mortgage.
Borrowing expenses also include other costs that the lender requires you to incur as a condition of them lending you the money for the property – such as the costs of obtaining a valuation or lender’s mortgage insurance if you borrow more than a certain percentage of the purchase price of the property.
The following are not borrowing expenses:
• insurance policy premiums on a policy that provides for your loan on the property to be paid out in the event that you die or become disabled or unemployed
• interest expenses.
If your total borrowing expenses are more than $100, the deduction is spread over five years or the term of the loan, whichever is less. If the total deductible borrowing expenses are $100 or less, they are fully deductible in the income year they are incurred.
If you repay the loan early and in less than five years, you can claim a deduction for the balance of the borrowing expenses in the year of repayment.
If you obtained the loan part way through the income year, the deduction for the first year will be apportioned according to the number of days in the year that you had the loan.

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