Tips for Home Builders – What you Can and Can’t Claim at Tax Time
Home builders often have several different operating costs, so it only makes sense for them to take advantage of tax deductions whenever they can. After all, getting tax back goes a long way towards sustaining profitability. Fortunately, the ATO allows several business costs to be claimed as deductions by any business, home builders included.
Here we a look at a few expenses home builders and other businesses can and can’t claim when lodging their tax deductions.
The costs of promoting your brand to your customers can be counted as a deduction. You can claim advertising and sponsorship expenses, such as in cases when you want to sell stock or hire employees. However, be sure that these costs aren’t related to entertainment (e.g. events and the like), as they won’t usually be counted as deductible.
To claim travel expenses related to your home building business, you have to keep a record of all receipts and specific details of your travels. Besides receipts, you can include itineraries and journal entries, airplane tickets, and other travel details. You want to take note of the purpose of the travel, destination, and dates. Do note that any personal activities mixed into your business travels are NOT deductible.
Car and Truck Expenses
You can also claim a tax deduction for expenses incurred when your company uses a vehicle for official business purposes. For home builders that frequently transport building materials and supplies, this can be a huge source of tax relief.
Home Work Expenses
If you run your home building business from home, or partly from home, you can claim deductions on expenses such as utilities (telephone and internet), insurance, heating, lighting, or cleaning. However, you can only claim the portion of these expenses related to your business. Larger tools which will be a big expense are also tax deductible and can be depreciated; meaning it may be wise to go our and pick up that professional looking air compressor you’ve been eyeing off all year!
Repairs and Maintenance
You can make a tax deduction on the cost of repairing and maintaining machinery, tools, and spaces used to produce income. For home builders, this can include the costs of painting, plumbing, and routine maintenance of electrical fixtures. This tax deduction typically refers to repairs, and not so much complete replacements. It also doesn’t cover immediate improvements after obtaining an asset.
Larger assets such as cars and even buildings are tax-deductible as depreciating items over a long-term period. You can also claim deductions on some capital costs related to putting up and closing down a business, provided you can’t make an outright deduction for it.
Salaries and Wages
As a home building business, you can claim tax deductions for wages paid to staff and also to yourself, so long as these wages are directly related with your company. Why is it important to make this distinction? In the case of partnerships, you can claim for deductions on wages paid to partner. Likewise, sole traders are unable to claim deductions on salary they pay themselves.
Given the sometimes dangerous nature of construction, insurance is often a necessary expense to stay in business. Fortunately, you can claim deductions on workers’ insurance premiums, life insurance, car insurance, fire insurance, and theft and loss insurance.