A house is one of the biggest investments you will make during your life. It certainly isn’t as simple as shopping for new clothes, and requires a lot more planning and preparation. However, it’s very easy for homeowners to get carried away and forget to consult with experts.
Indeed, while talking to an accountant or a financial advisor might seem like an additional expense and not a necessary requirement, it pays off when making major purchases, such as buying a house. According to the financial experts on Maryville University, it’s important to look for an accountant with the appropriate certifications. This helps ensure that they are trustworthy and have the necessary skill-set to help you establish a long-term plan that is best for you and your future home.
TaxSlayer senior adviser Mark Kohler shares that accountants are especially helpful for those who own rental property. Leasing properties can get tricky, and you want a professional to help figure out what kinds of tax deductions you’re entitled to.
So when you do decide to sit down with your accountant, here are some crucial questions they can answer.
What’s a good budget?
Although shopping for property can be exciting, the Washington Post warns against the rookie mistake of not knowing the expenses you’ll incur outside of the actual house price. Your accountant can assist you in devising a budget plan that meets your needs and maximizes how far your money can go. For example, you might have your eyes set on a home that seems to fall under your budget, but there are actually more factors to tick off of your check list. Property taxes, home insurance, and the general upkeep are just a few of the financial concerns that need to be considered. You don’t want to end up compensating down the road because you didn’t plan for the costs right at the beginning.
Do I need a depreciation schedule?
Sometimes, a depreciation schedule can pay off and ease your financial burden. But first, you have to understand its value and how it can make negative gearing tax positive. If you find yourself deciding between purchasing a new home with high depreciation allowances or an older property you can renovate instead, it’s best to ask your accountant.
Is it better to buy a old or new property?
Like purchasing new developments, buying an old property comes with its fair share of pros and cons. Though one might be cheaper than the other, there are always trade-offs you need to consider. For one, the value of assets in an old house decreases as it goes through wear and tear, but a new house might be out of your budget. Again, there is no single answer for homebuyers, but an accountant can help provide you with an informed decision when analyzing your options.
What’s the difference between a repair and a renovation?
Repairing and renovating isn’t the same thing, especially in the real estate world. Knowing the difference between the two can affect the permits and expenses you need. For instance, replacing broken windows would be considered a renovation, which we discussed previously here on the Rex Homes Blog. On the other hand, fixing cracks and electrical connections would be considered repairs. These have different permit requirements and will impact the value of your home in different ways.
What’s the best type of ownership?
Knowing whose name to register the property under is a critical step. Should problems arise with your house, you don’t want people questioning your ownership. You might decide to have it in your own name, a company’s name, or a joint name with your partner or family. Each type of ownership also impacts tax planning differently, so consider the kind that can bring you the most tax-related benefits in the future.
Written by: Jessica Hall