Renovations in older properties are the most commonly missed depreciation claim. It’s not surprising when many investors often hear from someone with limited knowledge that there’s no depreciation available in older properties. This ignores two important facts. Most older properties have been renovated or improved, and depreciation can be claimed on renovations and improvements.
In the last 20 years, we’ve helped 1000s of property investors claim substantial deductions for older properties. First we’ll look at properties built after 1987 where there is depreciation claimable on the original structure and renovations.
Claiming depreciation for renovated properties built after 1987
Many 30-year-old properties have had work done and most likely in the last 10 years to make them more contemporary and appealing. A typical cosmetic renovation by a previous owner to freshen the place up would normally be between $20,000 and $30,000 if we’re excluding the assets. That’s around $500-$750 per year, and that’s claimable every year for the next 30 years if done 10 years ago.
If the property is 30 years old there’s still another 10 years of depreciation available on the original structure as well. For a modest project home that’s around $2000 in yearly deductions on top of the renovations.
Depreciation available for substantial renovations
Many older properties have had substantial renovations done by previous owners. The older the property is, the more likely it’s had substantial renovations. A $100K reno can mean $2,500 per year in depreciation. If the property was built before 1987 all the available depreciation is in those renovations, but that can be substantial.
Larger Depreciation claims for very old properties
It’s very rare to find a property that’s more than 50 years old that hasn’t had substantial renovations. Many very old properties were too small by today’s standards, lack open plan living, and have electrical, plumbing that’s not compliant with current building codes. What can seem a fairly modest renovation may have involved substantial work to complete. These renovations often cost more than building a brand new home. With the available depreciation claim being based on the cost of the work, large claims are common.