As with any other income-producing activity, you can claim expenses involved in producing an income from your investment property. You should download a copy of the Inland Revenue’s booklet Rental Income – IR264, which details what you can claim. Below is a list of the major types of expenses:

• Accountancy fees – including any bookkeeping or management costs.
• Advertising costs – where these are used to find tenants.
• Bank charges.
• Insurance.
• Interest costs – interest incurred on the rental property may be tax deductible (but repayment of principal on your home loan is not).
• Home office costs – if you are using your home to manage your residential property, part of the costs of running your home may be tax deductible.  You should seek professional advice before claiming for this expense.
• Legal costs – conveyancing costs are not tax deductible, but you may be able to claim on legal fees for arranging finance and other general legal advice about your investment property.
• Property management costs – if you use a property manager, you may be able to claim the cost.
• Rates.
• Repairs and maintenance – this can be a ‘grey’ area.  Any major maintenance completed in the first year of ownership may not be deductible, as Inland Revenue assumes these costs should have been factored into the purchase price.  Work which extends the property beyond what it was at the time of purchase is treated as capital expenditure.  This is not immediately deductible (but can be depreciated).  Seek professional advice if in doubt about what to claim.
• Travel – reasonable travel costs may be tax-deductible.  To claim travel costs, you would need to keep a log of at least three months travel or mileage recorded.  Mileage is claimed at Inland Revenue rates – you can download IR mileage reimbursement rates from the Inland Revenue website.
  

Note: you can only claim expenses while the property is rented or available for rent.  If the property is not available for rent for a period (for example if you are using it yourself during that time), expenses may need to be pro-rated.

This material is for information purposes only. You should seek professional advice related to your individual circumstances. While The National Bank has taken care to ensure that this information is from reliable sources, it cannot warrant its accuracy, completeness or suitability for your intended use. To the extent permitted by law, The National Bank does not accept any responsibility or liability arising from your use of this information. Our lending criteria, terms, conditions and fees apply.