Negative Gearing is a feature of Australian taxation where losses from real estate or share investments can be offset against assessable income.

In simple terms, the difference between rent, and interest and maintenance fees for investment property can be claimed as a deduction on your income tax. As a result, many individuals are heavily geared into investment properties in Australia. This could be a major cause of poor housing affordability in Australia.

Do other countries have such a system ? If yes which countries and how does it work there?

2 Answers 2


I would say similar rules apply in the US. If you have a net loss from rental property, you certainly can claim that loss against your personal income.

There are various rules around this though that make it a bit less clear cut. If you are a "real estate professional", which basicly means you spend at least 750 hours per year working on your rental properties (or related activities), then all losses are deductible against any other ordinary income you have.

If you aren't a "real estate professional", then your rental income is considered a "passive activity" and losses you can count against regular income are limited to $25,000 per year (with a carry-forward provision) and begin to phase out entirely if your income is between $100,000 and $150,000.

So, the law here is structured to allow most small-time investors to take rental real estate losses against their ordinary income, but the income phase-out provision is designed to prevent the wealthy from using rental property losses to avoid taxation.


In India, where I live, you can:

  • deduct upto 150,000 rupees of interest per year on the house you live in
  • offset any "loss from property" (that is, excess of interest/tax over rent received) against any other income. If other income is not sufficient to fully offset it, you can carry forward the balance for eight (ed: writter earlier as three) years. (This only applies if you don't live in the house)
  • take off 30% out of any rental income you earn, tax free, as "cost of maintaining" the property. In short, only 7/10ths of the rent you earn is counted as income.
  • If you sell a house, you can buy another house within two years for the same or higher cost, and not pay capital gains taxes.

In addition, housing loans are given priority status as well - bank capital requirements on housing loans is lower than for, say, a corporate loan or a loan against other kinds of collateral. That makes housing loans cheaper as well - you get a home loan at around 10% in India versus 15% against most other assets, and since you can deduct it against tax, the effective interest rate is even lower.

Housing in India is unaffordable too, if you're wondering. In a suburb 40 Km away from Delhi, a 2000 sq. foot apartment, about 1500 sq. ft. of carpet area, with no appliances costs about USD 250,000.

  • Ok, so point two seems equivalent to negative gearing. Other points seems to very generous for property investors. Can you provide a good link to this.
    – kanad
    Commented Nov 14, 2010 at 10:31
  • Sounds like Indian government have got really good things in place to help the population invest in property. Commented Nov 16, 2010 at 3:12
  • Links: incometaxindia.gov.in/publications/5_house_property/… - that is what our IT deparment has to say on the subject. I had to edit after I realized the loss-carry-fwd was 8, not 3 years. Also certain sections of society needn't pay taxes on income from property (Political parties, certain tribes, farmers) Commented Nov 16, 2010 at 4:35

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