1.) What Can You Afford?
Make sure that you first take into consideration the amount that you are able to put towards a monthly payment on a home. You won’t want to get a new home that you love and then realize that you’re not able to afford it. Take the time to review your monthly expenses and total savings that you have.

2.) Decide Where You Want To Live
One of the main aspects of being happy in your home is being happy with the area that you live in. If you’re moving locally, this may be an area that you are already familiar with and don’t need to do much investigation. If you’re moving to a new city then make sure to take the time to investigate. Some of the things to consider are the crime rates in the area, home values, and if you have kids or think you may in the future, look into the school districts also.

3.) Get Pre-Approved
Once you’ve decided how much you can afford, and the area that you are looking to live in, you’ll want to then decide on a mortgage company. There are many different companies that are available to choose from. Contact an agent and get pre-approved for a mortgage loan. This is a major step in the process because it will give you the amount that you are pre-approved for, giving you the confidence as a buyer to be able to look at the homes that you may want. Now its time to go find the house you want.

4.) Select Your Home
Take a look at many different homes that are in your price range. Sometimes this means that you’ll have to look at homes that you may not think you like at first, but the experience is important. After finding a home that you really feel that you love, you’ll want to take the next step. Make sure that you get an inspection on the home. This needs to be done no matter if the home is new or pre-owned. Some companies can supply you with contacts for hiring a professional home inspector.

5.) Negotiate the Best Home Price
The best way to negotiate the price of the home is to investigate the selling prices of other homes in the neighborhood. Find a home that is similar to the one that you are looking to buy and look into the selling price. That will give you a good idea of the price that you should be looking to pay on your new home.

6.) Buy the Home and Move In
Many times there are details that aren’t taken care of until the final closing day on the house. Closing day is the day that the purchase price that you agreed upon is paid and the title on the house is transferred from the seller to the buyer. Most of the time this is not handled by you and the seller, but rather by the mortgage lender’s attorney or title agent. This helps protect the buyer and sellers rights by making them a third party.

In the end buying a home may seem like an overwhelming experience. This experience should be fun, exciting, and act as a new start for you and your family. Instead of being overwhelmed by the process, just use these easy steps and work to enjoy the experience.

Am I able to claim Interest Deduction on my own home?

The tax rules say that the interest on a loan that you used to buy your home is not deductible since it is private in nature. However, if you were to rent your home out, and this creates income, then the interest will be deductible from the point that your home starts to produce income. For example, if you were to have to move for a job, and rented your home out for the years that you were away, that would count.

Can I claim Interest Deduction before and rental income is derived?

The short answer is Yes. If you buy a home with the full intention of renting the property out, then interest as well as other expenses will still be deductible, even if there is no rent income received. When the tax office looks at your returns, they will take into consideration any time that it may take to make renovations or to look for tenants.

What else is able to be claimed?

You are able to claim interest charged on a loan that you’ve used to:
- Purchase some type of depreciating asset (example: air conditioning) for the rental property.
- If you were to make renovations or repairs on the rental property, such as roof repairs.
- Making a purchase of land on which you intend to build a rental property in the future

What is NOT able to be claimed?

As mentioned above, you will not be able to claim the interest on any private expense, such as money used to pay for a car loan, or if the home hasn’t been bought with the intention to produce any income.

What records need to be kept?

Keep all of the records of all Interest expenses in order to make the proper claim. Legally, keep all your records for 5 years from the date that your tax return is filed.

Typically there are two methods for holding a property with more than one owner:

1.) The case of Joint Tenants – The most commonly used case of joint tenants is during a Marriage. Joint tenants hold the property shares of the property at an equal 50-50 ratio. If there were to be a death of one of the tenants, then the share will automatically pass over to the other tenant. If the property is a rental, any profits as well as losses must also be shared the same way. Most importantly, Joint Tenants aren’t able to sell off their share of the property without the permission of the other tenant. This clause helps to avoid many disputes about who owns what, or who can do what with the property.

2.) The case of Tenants in Common -This case is different in a few ways; first off each tenant has an identifiable interest in the property. These shares can be unequal, so instead of 50-50, it can be 60-40, or some other percentage, depending on what is agreed upon. Unlike the case of Joint Tenants, with this case you can decide who will receive your share upon death by stating it in your will. Most importantly, make sure that your share of the property is protected no matter which proportions you designate yourself.

Which case is better?

The recommended choice would be Tenants in Common. Reasons for this are obvious, being that you will be able to have more control in a case of any dispute that may arise, or even in the case of divorce or death. Also, if all the parties don’t contribute equally to the property, then there is no sense in making it a 50-50 share. Instead, use the Tenants in Common and choose the shares be deciding who contributes more. In the end, no matter which you choose, it is important to know that you are able to change one holding over to the other if you decide to do so.

Tax Planning:

When looking into co-ownership, think twice before jumping into the situation. Keep in mind that the both of you will have to split the loss, no mater what the situation is for each of you. For instance, if there is one partner that happens to fall into a very high tax bracket, and the other does not, you still have to split any losses that you may have. This will cause you to not gain in the benefit of claiming the losses.

Keep in mind that the tax office has a very distinct line between running expenses, and occupancy expenses. Generally speaking it is easier to claim running costs on your tax return, and only in limited circumstances a deduction may also be allowable to occupancy expenses like rent and mortgage interest.

For example, running expenses relate to the use of facilities’ within your home. This will include your electricity charges for the heating, cooling, lighting, cleaning, depreciation, and the cost of repairs on items or furniture or furnishings in the office.

Occupancy expenses on the other hand relate to the ownership or the use of a home that are not affected by the taxpayer’s income earning activities. For example, these include rent, mortgage interest, water, municipal and home insurance premiums.

Claiming your Home Office Expenses and Running Expenses

You are able to claim a portion of your running costs, such as gas and electricity, or the tax office gives you the option to claim a calculated deduction of .26 cents per hour. Also, you are able to claim other home office expenses, like your phone, mobile or internet bills, as well as a decline in the value of your computer, furniture or other equipment. All of these things will be calculated separately.

Example of home office claim (portion of cost)

Gas and Electric bills = $1000.00/year * 15% = $150.00 (the 15% is the ratio that was worked on the business)
Depreciation of computer 50% = $300.00 (50% of the computer is used for private use)

Example of home office claim (% of total hours)

.26 cents * 10 hours/week * 52 = $132.50
50% Depreciation on computer = $300.00 (50% of computer used for private use)

- A deduction is allowable only where additional running cost are incurred by a taxpayer because of income producing activities. Also, the income producing use of the home office needs to be substantial and not merely incidental.
- If home office equipment, such as a computer is used only party for work or business purposes then the decline in value deduction is reduced by the amount that reasonably reflects the extent that that equipment was used strictly for your income
- A deduction is allowable to the cost of the telephone calls made for your work or business purposes
- Individual taxpayers who claim home office expenses are required to be able to prove that they have incurred such expenses

Claiming home office expenses – Occupancy expenses

There are only limited circumstances in which a deduction will be allowable for occupancy expenses like rent and mortgage interest. They can only be made if you refer to your home as your “Place of business”.

What is defined as a place of business?
- The area is clearly identifiable as a place of business
- The are is not readily suitable or adaptable for any private use or domestic purposes that would generally be associated with the home
- The area is used exclusively or almost exclusively for carrying out your business.
- The area is regulary the place of visits for clients or customers

Which Expenses can be claimed?
In addition to running costs, you are able to claim
-Rent (apartment, house, condo, etc,)
– Interest on the mortgage
- Council and water rates
-Home insurance premiums

An example of the home office claim for Occupancy Expenses:

Rent = 10,000.00/year * 30% = $3000.00 (30% is the floor area used for business)

-In most cases, the apportionment of the total expense incurred on a floor area basis is the right method that is used for claiming calculations
-Where an area of the home is a place of business for only a part of the year, it could be necessary for expenses to be appointed not only on a floor area, but also on a time basis
-The ATO allows deductions for non-capital expenditures on repairs to the premises, for the purpose of producing assessable income.