Repairs & maintenance vs improvements

As you will know, landlords spend money on their properties, either to repair them and keep them in good condition or to make improvements/improve the living conditions of their tenants.

For tax purposes, there is sometimes a very fine line between these two things.

Sometimes, the purchase of something that would normally be considered to be an improvement (like putting a dishwasher in) can be claimed as an expense for tax purposes.

This makes the cost of that item able to be offset against the rental income in the year that it is paid, so that reduces the taxable profit for the landlord.

The situation where they are able to do this is where that item cost less than $500.00.

Other items that fall in to that category could be furniture, heat pumps, hot water cylinders, vacuum cleaners – anything that would normally be considered to be an improvement to the property or the livelihood of the tenant.

Often those items are over $500 and they therefore can’t be offset against the rental income in one year.

The cost of them is offset over several years, and this is known as depreciation.

It’s important to know where you stand with what you spend and it’s tax implications.

Get it wrong and you could end up in trouble with IRD.

So make sure you get advice from an experienced accountant or advisor.

Got questions? Call our team on 09 6302655.

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