Tauranga Property Investor Q&A: Rental income deductions

Question:

What expenses can be deducted from rental income?

Answer:

Deductible Rental Expenses

When it comes to deducting expenses from rental income in New Zealand, the following costs or expenses can generally be claimed:

• Rates and Insurance: You can claim the rates and insurance on your rental property.
• Interest:
  From 1 October 2021 until 31 March 2025, the interest limitation rules limit the ability to claim interest as an expense for residential rental property in New Zealand.
  From 1 April 2024, you can claim 80% of the interest incurred for funds borrowed for residential property. This is regardless of when the property was acquired or when the loan was drawn down.
  From 1 April 2025 interest deductibility will be fully restored, and you will be able to claim 100% of the interest incurred.

• Fees paid to an accountant for managing accounts, preparing tax returns and advice
• The costs of taking legal action to recover unpaid rent
• Travel expenses for travelling to inspect your property or to do repairs
• Agent’s Fees and Commission: Fees paid to an agent for collecting rent and maintaining the property are deductible. Commission paid to an agent for finding tenants is also deductible.
• Repairs and Maintenance: Costs for repairs and maintenance to keep the property in rentable condition are deductible.
• Depreciation on Chattels: Depreciation on items such as furniture, appliances, and other chattels used in the rental property can be claimed.
• Administrative Costs: Costs related to the administration of the rental property, such as advertising for tenants, can be deducted.
• Apportionment of Expenses: If the property is used for both rental and private purposes, expenses need to be apportioned and can be claimed for costs relating to the rental purposes.

Non-Deductible Expenses

Certain expenses cannot be deducted from rental income, including:

• The principal portion of any mortgage repayments.
• Costs of repairs or replacements that improve the property and increase its value.
• Costs of adding to or improving the property.
• Real estate agent commissions charged as part of selling the property.

Your Investment Property Strategists

By understanding the rules around deductible and non-deductible expenses, you can optimise your property’s profitability and avoid missing out on valuable savings.

Our Investment Property Accounting Services help Tauranga property owners navigate the complexities of rental property investments. Whether you need assistance with claiming deductions, managing your accounts, or planning your investment strategy, our team has the expertise to guide you.

Contact Ingham Mora today to ensure you’re making the most of your rental property investments.