What expense deductions can I claim against my property?
Deductibility Rules
Whether you can claim an expense depends on it being linked to generating rental income.
For example, subscription fees related to myRent are deductible as the services and resources available are directly associated with managing your investment properties.
Motor vehicles
If you use your own vehicle for carrying out inspections or doing some repairs on the property you may be able to claim some running costs. You can claim by using the IRD-prescribed kilometre rates when visiting your rental property. Just be sure to keep a vehicle logbook recording the date, distance travelled and reason for each trip.
Low Value Assets
Any assets under $1,000 can be expensed. However, if multiple assets with the same depreciation rate are bought from the same supplier at the same time, the $1,000 limit applies to the total amount, not to each individual asset.
Repairs and Maintenance
For any spending over $1,000, your accountant should check whether the cost is repairs or actually a capital asset or an improvement. Any repairs that go beyond replacement are generally improvements to the property. For tax purposes you cannot deduct capital spend or improvements from your rental income.
Interest on Loans
If borrowing money, it’s the purpose of the loan that determines deductibility.
For example, if you borrowed $500k for some purpose other than financing the rental property (e.g. a new personal car or other personal asset purchase), the interest is generally not deductible.
Talk to your Accountant before borrowing or restructuring. Doing things correctly at the start can reduce future costs and help ensure optimal tax deductibility under IRD rules.
Why chattel valuations matter
A chattel valuation helps you split out the purchase price of your investment property into the various depreciation categories set by the IRD (e.g. carpets, appliances and curtains).
By splitting these items you can potentially increase your depreciation claim.
In many cases, the cost of the valuation is recovered in the first year through depreciation claims.
Valuit is a good option for chattel valuations. Fill out a simple form on our website to book a chattels valuation
Important: You must do the chattel valuation before your tax return is due for that property.
We’ll be sharing more valuable insights from Shortland Chartered Accountants in our next article — key updates on the Brightline test and ring-fencing rules.
In the meantime, if you need help with your tax return or have a question about accounting or property tax, book a free consultation with Shortland Chartered Accountants here.
This article is for general information only. You should always seek personalised, professional advice before acting on any of the material.
