It’s essential to know the tax rules when you own a rental property in Northland.
The experts at Rentals.co deal with these questions daily and are always available to help when you want to know the basics of how tax works regarding rental investment properties. They can also set you up with expert accounting services.
The Inland Revenue Department offers a 40-page booklet on the topic (click here to read and download), but the following are the basics of tax rules around rental properties.
The first tax question is whether you are a residential rental investor or a speculator/dealer in residential rental properties, as dealers are taxed more heavily.
Rental property investors who generate ongoing rental income, without any firm intent of resale, pay income tax on their net rental income but generally not on the sale proceeds of the property.
Property dealers/speculators, on the other hand, who buy a property intending to sell it, have established a regular pattern of buying and selling property and must pay income tax on any gain they make from re-selling. Speculators / dealers must also pay tax on rental income; GST may be applied.
Expenses you can't deduct from your rental income in your tax return:
Different tax rules for holiday homes
As the Inland Revenue Department explains, if your holiday home is rented to the public for short-term stays, you need to be aware of “mixed-use” asset tax rules and exemptions, and how private use differs from income-earning use. There are also rules (which could save you money!) around staying at the property for repair work, and rules if you earn less than $4000 from rental in a year on the property.
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