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Ngā moni whiwhi reti me te utu tāke Rental income and paying tax

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If you're charging rent, you may need to pay tax on the rental income you earn in the same year you receive it. Your rental income could be from a house, land, caravan, sleep-out, building, holiday home or room in your own home.

Rental property

  • Generally, the payments you get for renting out property are income.
  • You can deduct rental expenses from the total rental income you earn in the year.
  • You need to fill in an annual tax return.
  • You must keep records of income and expenses for 7 years.
  • Tenancy Bond Centre payments you receive for things such as damages and rent arrears are rental income.

Renting out your house or a room

Payments you get from people renting your home or a room are taxable. This includes payments from:

  • people renting through websites such as Airbnb or Bookabach
  • one-off or irregular rentals.

If you provide this type of short-stay accommodation, you may have different options for working out your tax:

  • the standard cost option
  • the actual cost option.

If you use the standard cost option, there are set amounts you can claim as deductions. You only need to declare the rental income in excess of the set amounts.

If you use the actual cost option, you must declare all the rental income. The deductions you can claim are based on your actual costs, apportioned based on floor area and number of rental nights.

Renting out a holiday home

There are different rules if you rent out a holiday home, depending on your situation.

If you have a holiday home that you rent out, use privately and it is unoccupied for 62 days or more the mixed-use asset rules apply.

If the mixed-use asset rules apply, you can choose not to declare rental income from the property if the rental income is:

  • less than $4,000 a year
  • less than 2% of the holiday home's value and you make a loss from the rental activity because your deductible expenses are more than the income.

If you choose not to declare the rental income you will not be able to claim expenses for the holiday home.

If the mixed-use asset rules do not apply, you must declare all rental income from your holiday home. Rental expenses can be deducted from this income. Some expenses may be fully deductible. If you use the holiday home privately, some expenses will only be partly deductible.

Private boarders or home-stay students

If you have five or more boarders at any time in the year, you must declare your rental income from boarders in your return.

If you have less than 5 boarders you may have different options to work out your tax:

  • the standard cost option
  • the actual cost option.

If you use the standard cost option, there are set weekly amounts you can claim as deductions for living costs. There is a set formula for deductions for your housing related costs. If you provide transport to your boarder, you can also claim deductions for transport costs. This option may mean you do not have to declare any rental income from boarders.

If you use the actual cost option, you must declare all the rental income you get from boarders in your tax return. The deductions you can claim are based on your actual costs, apportioned on floor area and how long the boarders stay.

Jointly-owned rental properties

If you own rental property in partnership with 1 person or more, you may need:

  • a shared set of rental records
  • to file an IR7 income tax return with us.

All joint-owners will need to file their own IR3 tax return for their share of the rental income.

Flatmates or tenants

Payments flatmates make to cover their share of accommodation costs are not usually taxable income. If you are making a profit from flatmate rental payments, you will need to file a return. You must include rental income in your individual tax return - IR3 for:

  • flatmates living with you
  • tenants living in another part of your multi-flat building.

You can deduct expenses from your rental income. You can only deduct these for the part of the property you rent out. 

Rental expenses can be either:

  • for the part of the property you rent out
  • apportioned for the whole property. For example, if you rent out 25% of your property you deduct 25% of all the property expenses.