Healthy Homes Standards Claim Deductions

Being a landlord comes with numerous responsibilities, one being submitting taxes related to your rental property. It’s important to always consult your tax consultant or IRD directly for specifics on tax-deductions. But as a guideline and using the IRD website as a reliable source, we’ve put together a checklist on what you should consider when completing your next tax returns.

GST and residential rent

GST is not charged on residential rent. This means you do not include residential rental income in your GST return even if you’re registered for GST. When you deduct rental expenses in your tax return, use the GST inclusive amount.

What about deductions for costs incurred to meet Healthy Homes standards?

IRD have put together a draft document addressing this question which provides the answer including a breakdown of the following in relation to it:

• Revenue related deductible costs, capital costs and items able to be depreciated.
• Tax treatment including applying the three-step test in the context of Healthy Homes expenditure with attributing information on revenue, capital, depreciation and deductible costs

The draft also addresses Healthy Homes standards including:

• Smoke alarm standard
• Insulation standard
• Heating standard
• Ventilation standard
• Moisture ingress and drainage standards
• Draught stopping standard
• Record keeping and provision of compliance information in tenancy agreements requirements

Expenses you can deduct

The expenses you can deduct from your rental income are:

• The cost of insuring your rental property
• The rates for the property
• Payments to agents who collect rent, maintain your rental, or find tenants for you
• Fees paid to an accountant for managing accounts, preparing tax returns and advice
• Repair and maintenance costs
• Fees for arranging a mortgage to finance the rental property
• Fees for drawing up a tenancy agreement
• The cost of getting a valuation required to get a mortgage, but not insurance valuations
• The costs of taking legal action to recover unpaid rent
• The costs for evicting a tenant
• Mortgage repayment insurance
• Depreciation on capital expenses
• Travel expenses for travelling to inspect your property or to do repairs
• Legal fees involved in buying a rental property, as long as the expense is $10,000 or less

Note: You can also deduct interest on money you have borrowed to buy your rental property. But you cannot deduct this if you have used some of the money:

For something else

• To top up the mortgage for another purpose
• Expenses you cannot deduct

Expenses you cannot deduct from your rental income are:

• Capital expenses
• The purchase price of a rental property
• The principal portion of mortgage repayments
• Costs of making any additions or improvements to the property
• Cost of repairing or replacing damaged property, if the work increases property value
• Real estate agent fees charged as part of buying or selling the property
• Depreciation on the rental's land or buildings
• Your time when you do repairs and maintenance work
• Legal fees involved with selling the rental property (unless you’re in the business of providing residential rental accommodation)

Note: The difference between repairs and improvements can be complex. If you are unsure about whether work done on your property is repairs or improvements, talk to a tax agent or your property manager.

Additional Resources: 

Check out this more detailed overview of Tax rules for people who rent out residential property and holiday homes.