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Tax on holiday home

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  • Tax on holiday home

    We own a house with a detached sleepout and myself and husband want to rent our house as a holiday home and stay in the sleepout while it's rented. So we will be on the premises the whole time. I have read about the mixed-use holiday home rules on the IRD website but it doesn't mention about living onsite. So it doesn't seem to me that our house falls into the mixed-use category? Would we need to pay tax on money earnt from renting since we still live on the property? I have also read that if a house is sold that has been used for a holiday home we would need to pay tax on the income we make from the sale. Does this sound accurate?

  • #2
    Hi Curious1,

    I suggest you get some full advice on this.

    To give you quick answers

    1) Rental income - yes you have to return as taxable income, and you can claim expenses against such as portion of rates, interest etc.

    2) Pay tax on sale - There are circumstances where a sale can be taxable, but just because it is a holiday home doesn't change this. In general if you purchased a holiday home as a long term rental, owned for more than 2 year brightline test, and not associated to trader or developer, then any gains would be tax free capital gains.

    3) You have one personal house (sleepout) and one holiday home. No mixed use if you don't use the holiday home for private, so mixed use rules wouldn't apply. Any costs associated with personal house wouldn't be claimable (except for home office costs) and anything associated with rental would be.

    4) Get advice on GST, especially if income will be over $60k per year

    Book a free chat here
    Ross Barnett - Property Accountant