WHAT CAN YOU CLAIM ON YOUR INVESTMENT PROPERTY?

What can you claim on your investment property? Investing in property can be a rewarding venture, but to maximize your returns, it’s essential to understand what expenses you can claim. Knowing your deductible costs can help reduce your taxable income, ensuring you keep more of your rental earnings. Below, we provide an overview of claimable expenses for property investors in New Zealand.

1. Mortgage Interest

One of the most significant expenses for property investors is mortgage interest. However, due to recent tax law changes, interest deductibility rules have been adjusted. Before claiming interest, check whether your property qualifies under the current tax rules (which keep changing all the time!) You can read more about tax returns and processes here.

2. Rates and Insurance

You can deduct the cost of council rates and insurance premiums for your rental property. These expenses are part of the operational costs required to maintain a rental business.

3. Property Management Fees

If you hire a property manager to handle tenant relations, rent collection, and maintenance, their fees are tax-deductible. This includes costs related to tenant screening and lease agreements.

4. Repairs and Maintenance

Routine repairs and maintenance are deductible, but capital improvements (upgrades that increase the property’s value) are not immediately claimable. Examples of deductible repairs include:

• Fixing leaks
• Repainting
• Replacing broken fixtures

For a deeper dive into record-keeping for such expenses, refer to this guide on rental property records.

5. Depreciation on Chattels

While buildings themselves are no longer depreciable, you can still claim depreciation on chattels such as:

• Heat pumps
• Stoves
• Carpets
• Curtains
• And much more.

Working with an accountant can help ensure you’re accurately calculating depreciation to maximize your deductions.

6. Accounting Fees

Hiring an accountant to manage your tax affairs is a deductible expense. If you’re looking for expert property accounting services, check out our blog articles for general advice, or contact us for specialized advice.

7. Legal and Professional Fees

Legal fees incurred when setting up rental agreements or handling tenancy disputes are deductible. Additionally, legal expenses up to $10,000 per financial year can be claimed for other property-related matters.

8. Advertising for Tenants

Any costs incurred to advertise your rental property (e.g., online listings, printed advertisements) are deductible as they help generate rental income.

9. Travel Expenses

If you travel to inspect your rental property, conduct maintenance, or meet with tenants, you may be able to claim travel expenses. However, personal trips that include rental-related tasks are usually not deductible. See this article for more info.

10. Body Corporate Fees

If your rental property is part of a unit title (such as an apartment), body corporate fees may be deductible. However, it’s essential to differentiate between administrative fees (deductible) and capital improvement levies (not immediately deductible).

11. Utilities (if Covered by Landlord)

If your rental agreement includes utilities such as water or power, these costs are deductible. Ensure proper documentation to differentiate between personal and rental-related expenses.

12. Loss Ring-Fencing Rules

In New Zealand, rental property losses are now subject to ring-fencing rules, meaning they can only be offset against rental income rather than other personal income. Learn more about interpreting your financial statements here.

13. Claiming Home Office Costs (if Managing the Property Yourself)

If you use a property manager for your rental property, you may still be able to claim a portion of your home office expenses, including:

• Internet
• Phone bills
• Office supplies

For more info, see this article. If you are self-managing, then you can claim much more. More info here.

Final Thoughts

Understanding what you can claim as a property investor is key to optimizing your tax position. Keeping well-organized records and working with an expert property accountant can help you stay compliant and make the most of your deductions.

For more in-depth guidance on investment property tax matters, contact us or explore our blog articles. If you are a new investor you’ll find  this article to be useful.

For additional guidance, you can also refer to external sources such as Inland Revenue New Zealand for the latest tax rules and regulations on rental properties.