Originally posted by Monsterbishi
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The earlier in a mortgages life you can claim deductions on, the greater the opportunity to recoup the $$$ - remember that as you pay a mortgage off, the amount of principal being paid increases but the interest decreases, then when you use that money to pay down the mortgage you'll end up paying less interest overall.
I look at it from this perspective - If at the end of the financial year I have $1000.00 of deductable expenses, I can claim back the corresponding amount of income tax that I've already paid, in my case it would be $390.00 due to my income. At the other end of the stick - if I make $1000.00 of profit, not only can I not claim that $390.00 back, but I'll be paying that much again in income tax, so whilst I'll have $610.00 in my hand, the IRD has $780 of my money instead of $0.
The benefits then extend to me over the longer term, as the $780 that isn't going into the IRD's pocket is Repairs and Maint instead (Compared to the $610), keeping my property in great condition meaning that when it does get to the point of being cashflow positive I can charge accordingly, and have minimal ongoing maintenance.
Disclaimer: Keep in mind that this is what I've gathered from 2 months of this PI lark, I could also be entirely wrong :-)
I look at it from this perspective - If at the end of the financial year I have $1000.00 of deductable expenses, I can claim back the corresponding amount of income tax that I've already paid, in my case it would be $390.00 due to my income. At the other end of the stick - if I make $1000.00 of profit, not only can I not claim that $390.00 back, but I'll be paying that much again in income tax, so whilst I'll have $610.00 in my hand, the IRD has $780 of my money instead of $0.
The benefits then extend to me over the longer term, as the $780 that isn't going into the IRD's pocket is Repairs and Maint instead (Compared to the $610), keeping my property in great condition meaning that when it does get to the point of being cashflow positive I can charge accordingly, and have minimal ongoing maintenance.
Disclaimer: Keep in mind that this is what I've gathered from 2 months of this PI lark, I could also be entirely wrong :-)
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