Depreciation question?

[sole]

Hi Guys

I have made major Improvement to my rental bathroom recently.

Including new floor, walls, ceiling, window, shower, vanity, heater and fan.
The labour includes, flooring, painting, plumbing and builder.

Any of these depreciable ?

[Anthonyacat]

Yes, some of those are depreciable. Some may also be immediately deductible as repairs and maintenance. Others will be entirely non-deductible, as they're considered part of the building.

For an exact blow-by-blow answer you'll need to contact your tax adviser.

[Rosco]

The answer like so often is it depends. You haven't given enough information to give a definite answer about it.

As above it is best to get specific advice from a property accountant.

Ross

[klauster]

In general – improvements need to be capitalized (answer is NO) , repairs are rent-deductible and only chattels can be depreciated.
Chattel depreciation guide see IR260

[Bob Kane]

I have made major Improvement to my rental bathroom recently.

Including new floor, walls, ceiling, window, shower, vanity, heater and fan.
The labour includes, flooring, painting, plumbing and builder.

Any of these depreciable ?

Probably not if you said this to your accountant.
But if you said "I have replaced/repaired my old broken down bathroom with similar items" you might get most of it as a deductible expense.

[artemis]

A good idea to get the tradies to specify on the invoices, for example, removed and disposed of cracked shower tray and shower door with failing seals. Only if the case of course. Photos also worth taking and suggest keep them in a folder in the cloud.

[klauster]

Probably not if you said this to your accountant.
But if you said "I have replaced/repaired my old broken down bathroom with similar items" you might get most of it as a deductible expense.

The question relates to depreciation not rent deductible repairs. Yes, you can write off an depreciated item and replace it with a new depreciation value.

The IRD released an updated list of residential rental property chattels that can be depreciated in November 2011, The IRD’s interpretation statement is the tax law by applying an 3 step test. Asking for a different view might cost you battle with the IRD if your accountant takes a different stance.

[Nick G]

My accountant summed up the IRD stance brilliantly - is the house going to still function as a house if you take that item away? Walls, floors, plumbing, wiring, showers etc aren't depreciable.

Here is the list. I think your heater and fan are depreciable and that's all. You depreciate the cost of the item + the cost of installing that specific item, get an itemised invoice from your builder or sparky.

At the same time, replacement or repair is different and might be maintenance. It depends on age of building. If you had a chattels valuation beforehand the value of items disposed of may be claimable. Check with your accountant (who hopefully is up to speed on property things).

http://www.ird.govt.nz/technical-tax/determinations/depreciation/depreciation-deter-dep80.html

[Rosco]

My guess would be nothing is depreciable in the list. But this is a guess, because I don't have enough detail.

As others have stated, you haven't asked what is claimable as a repair which is probably the best question. But again there can be cases where none of this is deductible as repairs. It all depends on the facts.

Ross

[mrsaneperson]

My accountant summed up the IRD stance brilliantly - is the house going to still function as a house if you take that item away? Walls, floors, plumbing, wiring, showers etc aren't depreciable.

Here is the list. I think your heater and fan are depreciable and that's all. You depreciate the cost of the item + the cost of installing that specific item, get an itemised invoice from your builder or sparky.

At the same time, replacement or repair is different and might be maintenance. It depends on age of building. If you had a chattels valuation beforehand the value of items disposed of may be claimable. Check with your accountant (who hopefully is up to speed on property things).

http://www.ird.govt.nz/technical-tax...ter-dep80.html

The vast majority of accountants are not up to speed on this, i have checked out quite a few . My last accountant was hopelessly out of touch on the whole subject of depreciation and making many mistakes so i switched to Tony Thorne who is on the ball with this and pleased with the results:

THORNE ACCOUNTING
Expert Property Accountants

Ph (09) 571 0491

Fax (09) 929 3269

642 Great South Road, Ellerslie, Auckland 1051

PO Box 11264, Ellerslie, Auckland 1542

Email [email protected]
Web www.thorneaccounting.co.nz