Depreciation on New vs. Old Homes
If you’re buying a new home, you get to depreciate your house and the assets in it. If you purchase a used property, you can depreciate the building, but only assets that you install new yourself. Based on an average $250,000 home, you can claim around an extra $35,000 in deductions over 5 years on a home you purchased new, compared with a 1 Year old home.
This is why it is so beneficial to have a Depreciation Schedule done as soon as you purchase a newly built home. Waiting for even just one year could cost you 100os of dollars that you could have claimed back.
Buildings built after September 1987 depreciate at 2.5% per year, however the assets within a home depreciate in value much more quickly. Because the assets depreciate much faster than the building it self, it is important to have a depreciation schedule set up from the earliest point possible – to claim on those assets before their value quickly becomes minimal.
If you’ve just bought a home, be sure to contact us on 131 546, or visit www.jimsbuildinginspections.com.au to arrange a depreciation schedule on your property.
Conclusion
When considering depreciation, old homes typically experience a faster rate due to wear and tear, outdated materials, and the need for more repairs. In contrast, new homes tend to retain their value longer as they benefit from modern construction standards, energy efficiency, and fewer immediate repair needs. Understanding these differences is crucial for investors and homeowners looking to make informed decisions based on long-term financial impact.
FAQs
Depreciation refers to the reduction in the value of a property over time due to factors such as wear and tear, age, and market conditions.
Yes, new homes do depreciate, but typically at a slower rate compared to older homes due to modern materials and construction.
Old homes experience quicker depreciation due to outdated infrastructure, frequent maintenance needs, and general aging.
Yes, homeowners can claim depreciation on investment properties, even if they are older, but the rate may be higher compared to newer properties.
Yes, depreciation can provide tax deductions for investment properties, reducing taxable income.
Depreciation is typically calculated based on the property’s age, condition, and improvements made. It is usually done using the straight-line method.
Yes, renovations can increase a home’s value, which may offset depreciation and provide a better return on investment.
Factors include the home’s age, condition, location, and the quality of materials used in construction.