If you own a rental property or are looking to invest in one, it’s worth understanding the different rental property expenses you may be able to claim to help lower your tax burden.
Rental Property Expenses Which Are Tax Deductible
- Legal fees incurred during the process of purchasing the property.
- Accounting fees for the ongoing costs of managing your rental accounts, preparing its tax returns and obtaining advice.
- The cost of advertising for tenants and agent letting fees.
- A valuation of the property for the purpose of getting finance, or a valuation of chattels for depreciation.
- Bank fees associated with applying for finance.
- Commercial cleaning of the dwelling and rubbish removal.
- Repairs and maintenance costs, i.e. the costs incurred in maintaining the condition of the property once it is tenanted or while it is available for rent.
- Lawn mowing and other gardening.
- Insurance on the rental property, and mortgage repayment insurance on the rental’s mortgage.
- Interest on money borrowed to purchase the rental property or renovate it.
- Vehicle costs incurred in travel associated with the rental property, such as conducting property inspections while tenanted (a mileage logbook should be kept for this).
- Rent collection fees.
- Rates on the property.
- Home office expenses may also be claimed if you can sufficiently prove to IRD that you manage your rental property affairs from home. In this case you can claim a partial deduction of your private home expenses such as electricity, rates, insurance, mortgage interest, phone, internet and so on.
Rental Property Expenses Which Are Not Tax Deductible
- A valuation of the property for the purpose of buying it.
- The cost of making improvements to the property, including any renovations and repairs made prior to the first tenant moving in.
- The cost of bringing a dilapidated property back up to a rentable standard after acquisition.
- The principal portion of your mortgage repayments.
- Any costs associated with finding a property to purchase.
For more advice on rental property accounting please contact our Property Accounting expert Grant Brownlee, Managing Director at UHY Haines Norton, at firstname.lastname@example.org or phone 09 839 0087. Grant specialises in all aspects of property investment, structuring and tax.