Can I claim a portion of my mortgage?

For many homeowners the question arises if they are able to claim a portion of the mortgage on their taxes. In the case that you own a business and are running that business from your residence, the answer to your question would be yes. There are, however, a few things that you may want to consider prior to claiming a portion.

One of the first things that you should consider is that at the when you buy your residence and use it strictly to live in, you are exempt from Capital Gains Tax when that property is sold. Once you claim a portion of your mortgage on your tax, you lose that exemption and are then subject to capital gains tax. It is important to know that even if you are claiming one room that you use as your office space for work, on a portion of your taxes, this will be partially subjected to the Capital Gains Tax. The actual legislation refers to whether you use the residence to earn taxable income, so, strictly speaking, you could lose the exemption anyway. However, where use is incidental this should not be an issue.

When speaking to our clients about this subject we do have other recommendations for them instead of claiming a portion of their mortgage on their taxes. Here are some other routes you could consider. While claiming mortgage interest and mortgage rates are considered ownership costs, things such as electricity, internet and telephone are not, those are considered running costs. If you were to track your usage you can then claim a portion of those on your taxes and continue to be exempt from the Capital Gains Tax, rather in the way a home office is claimed.

If you are debating what deductions you should or are able to claim on your tax returns we often recommend that you commence on some research. The most reliable resources would be the ATO website or corresponding with an accountant that can offer you advice on your personal situation. While claiming a portion of your mortgage may appear to be a positive decision for your circumstances, there are several alternative routes that may better suit your needs. The decision is not a ‘one size fits all’ one and there are a number of variables which could be relevant in making a decision.