11 June 2019
Claim it! Your guide to which expenses rental property owners can claim on
We all make bold claims from time-to-time. But, when it comes to claiming your tax returns, it’s important you understand what your legally entitled too. To ensure you’re claiming the correct returns for your investment property, we’ve created a step-by-step guide to help identify the expenses you can claim, today.
Effectively, there are six different areas you can claim on your property, as an expense, at tax return time.
You can rest insured.
Yes, the insurance you pay on your property can be claimed back, However, this can only be claimed on your home insurance directly relating to the property. You can also pair this with the rates you pay to the council, which together can make a tidy sum.
Now that we’ve got your interest!
Interest you’ve been charged on your loan amount, for the property, can be claimed back, but only if the interest directly relates to your rental property. Unfortunately, this means if you consolidated your personal loan into the mortgage, or say you’ve topped up the mortgage on an existing property to help purchase your rental, these are unable to be claimed from.
The benefits of Property Management: Fees and Commission.
Do you use a property management company? Well you should. One of the key benefits of externally hiring someone to manage your property, is the ability to claim back the fees, or commission, from maintaining the property. This also includes the costs (time and other) to find the right tenants to occupy your home.
Accountants - making your life less taxing.
Everyone needs a lawyer to dot the I’s and cross the t’s, but what about an accountant to keep all your finances in order?
Although there is no incentive for the cost to set up your property, investors are now benefitting from hiring accountants to work with them to manage the accounts of their investment property(s), whether it be through preparing tax returns, or advise them on their rental property. Reaping the benefits, homeowners can claim back the fees relating to your investment portfolio, as well as the professional service provided.
This is good news, as it provides an incentive for investors to follow the book(s).
Hiring a professional
There’s a new reason to stop putting off your DIY rental property repairs and claim back the cost by hiring a professional. Why? If you complete the work yourself, you’re only able to claim the materials and not your personal time cost. If you hire a professional, everything is deductible.
If you’re looking at making home repairs to leaky buildings, make sure you take an in-depth look into the requirements, to ensure the work your completing can be claimed back. This is a common grey area, where repair and improvement meet. Repair = claimable. Improvement = not.
Driving to and from your investment property
If you’ve selected to forgo a property management company and will be looking after the property yourself, you’re able to claim back your mileage to and from your rental property. And, with the rise of the petrol prices, why wouldn’t you!
Unfortunately, the ability to claim the depreciation on your investment property isn’t hugely straight forward. Rather than claiming a set fee off of the land and building value, a set depreciable value has been created to cover the costs of wear and tear, and aging of furniture and fittings.
We’d recommend contact the IRD, or your accountant to ensure you’re claiming what you’re able to.
Some common misconceptions investors believe, prior to taking the leap into the rental market include, claiming against:
- The price of a rental property
- The capital portion of the mortgage repayments
- The costs of repairing or replacing any damaged part of the property, if the work increases the property's value
- Real estate salesperson fees charged as part of buying or selling the property
If you’re concerned or want to query what you’re able to claim, we would recommend contacting your accountant or a tax expert.
Ring Fencing – What does this mean for property investment?
With all the hype surrounding the rise (and fall) of the Capital Gains Tax in New Zealand, a new legislation has flown largely under the radar.
Proposed to ‘ring-fence’ residential losses, the new legislation looks to have a direct impact on the amount you’ll be able to claim against your rental property.
The government has held off on finalising the law which was set to apply from 1st April. It is something that could take place and should be taken into consideration by those who will be borrowing heavily to purchase their investment property.
If you’ve been thinking about investing in a rental property, but have been unsure about the benefits, make sure you consider all the opportunities to claim against your investment.
Got a question, or want to know how to get the most out of your investment? Call the Lugtons team today. But, get in quick! The tax window closes on 7th July.