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Borrowing renovation costs

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  • Borrowing renovation costs

    I purchased a 3 bedroom rental and have borrowed the entire amount with an additional $6000 for whiteware and renovations. Can I claim interest on this additional money as a tax deduction, or only the proportion involved with the property? I have read some contradictory statements as to if I can or not.

  • #2
    Kia Ora Teach,

    Interesting question.

    I would say the additional $6000 loan for whiteware and renovations would be tax deductible. I understand that interest is deductible if:
    a) loan is used to make your gross income OR
    b) loan is used for business in order to make your gross income.

    From what you have stated each loan would come under these rules. As long as the whiteware or renovations are not for your personal benefit (ie oven for your own home or flat instead of the IP, or to fix your leaky roof etc), interest deductibilty should be okay.

    I'm not an accountant just a closet bean counter, so PLEASE get expert advice before you claim anything. You don't want to get a nasty surprise come March 31 and find out you weren't able to claim that extra $6000.