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Do i need to pay tax on renting a bedroom(s) out?

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  • Do i need to pay tax on renting a bedroom(s) out?

    Hi all,

    I have recently purchased a property and am looking at renting out a couple of the rooms (to some mates / or maybe list a room on trade-me) ...as I will need the money to help pay the mortgage... Anyway... I am wondering if I have to declare this income (and pay tax on it) should I choose to take that route? Would signing up a person as a boarder be a better option?

    What would be my best option in this situation? I need to remain living in the property so renting it out entirely is not an option at this stage..

    Any help would be much appreciated...

    Cheers
    ...there's no future in working

  • #2
    The IRD allow $247.00 per each of the first 2 boarders and $202.00 for subsequent boarders (up to 5). Outside of this you need to pay tax.
    http://www.ird.govt.nz/income-tax-in...ers-flyer.html

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    • #3
      Originally posted by lawt View Post
      The IRD allow $247.00 per each of the first 2 boarders and $202.00 for subsequent boarders (up to 5). Outside of this you need to pay tax.
      http://www.ird.govt.nz/income-tax-in...ers-flyer.html
      Thanks, very helpful
      ...there's no future in working

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      • #4
        That is very interesting, I didn't know that. Can anyone provide specifics as to why this is not considered taxable income? My mind is drawing a blank here.

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        • #5
          Because the IRD doesn't care about small fry......If your income is below the threshold you don't need to declare it....less paperwork for everybody.

          Same as people on low incomes not needing to file a tax return if they don't want to

          Cheers
          Spaceman

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          • #6
            Thanks for your reply spaceman. I would have thought it to be taxable income.... learning something new everyday.

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            • #7
              Originally posted by JPW View Post
              Thanks for your reply spaceman. I would have thought it to be taxable income.... learning something new everyday.
              Yea very helpful, Thanks Spaceman

              This is going to make my life a lot easier!
              ...there's no future in working

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              • #8
                My thoughts were that the IRD don't give anything away that they don't have to. I would have thought that these values were fairly close to actual costs if you include food, costs such as rates, power, water, insurance etc and repairs and maintenance.

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                • #9
                  Originally posted by JPW View Post
                  Thanks for your reply spaceman. I would have thought it to be taxable income.... learning something new everyday.
                  +1

                  Thanks to the thread starter

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                  • #10
                    Hi guys, my 'first post' but read soooooo much useful information on here over the past few months!

                    Could 2 people renting out a minor dwelling (same title, insurance etc as the main house) be classed as boarders?

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                    • #11
                      Hi Crookie,

                      Is the minor dwelling part of your home or a garage? I'm sure the other's will correct me if I'm wrong but I believe so...
                      ...there's no future in working

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                      • #12
                        no, it's a separate building (65m2) located right next to the main house,

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                        • #13
                          Originally posted by Crookie View Post
                          no, it's a separate building (65m2) located right next to the main house,
                          Were it me I would carefully consider if it falls under the auspices of the RTA and use that as a guide.

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                          • #14
                            Originally posted by lawt View Post
                            The IRD allow $247.00 per each of the first 2 boarders and $202.00 for subsequent boarders (up to 5). Outside of this you need to pay tax.
                            http://www.ird.govt.nz/income-tax-in...ers-flyer.html

                            DBrown....hope you understood......this applies to boarders, NOT flatmates

                            Boarders of course pay a sum of money which is all inclusive of food, rent, phone, power costs etc and is seen as reimbursing the LL for necessary expenses.

                            JPW.......I believe the reason the IRD ignores such "income" harks back to Muldoon who said he believed that taxing the poor folk who had to have boarders to make ends meet as "penny pinching"....the poor folk of course he believed to be elderly widowed women

                            If you have flatmates, then yes, the IRD regards this as income and will be taxed....but of course with income comes expenses. e.g. a proportion of the interest expense on the mortgage, rates, insurance etc. You might even get a tax refund on your PAYE

                            It's up to you which route you choose, but if you choose the flatmate scerario it may prove to be a tad difficult to change when the taxable expenses reduce and you are liable to pay tax
                            Last edited by Ahar; 29-11-2012, 10:27 PM.

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                            • #15
                              Originally posted by lawt View Post
                              My thoughts were that the IRD don't give anything away that they don't have to. I would have thought that these values were fairly close to actual costs if you include food, costs such as rates, power, water, insurance etc and repairs and maintenance.
                              This is correct. To save time and paperwork there is deemed to be this level of costs, so if the boarding income is under the thresholds there is no tax to pay. If under, can't claim a loss!

                              A minor dwelling is no boarders. Seperate rental.

                              Flatmates - then have to return income, but can claim portion of expenses.

                              Ross
                              Book a free chat here
                              Ross Barnett - Property Accountant

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