tax on rental income?

[frazzledfozzle]

Sorry for posting such a basic question but can someone tell me what the tax situation is on rental income?
If I have a mortgage on a rental property that is costing me $300 a week in repayments and I'm getting $350 a week in rental income what if any of the rental income is subject to tax?
Is the $350 a week deemed to be income so is subject to tax?

If we bought property or land that would be used for business purposes by ourselves I understand we can claim a tax credit on the interest part of the mortgage repayments does anyone know what rate or percantage that is calculated at?

Thanks very much again
frazz

[NomoneyNotalk]

hi,

Only the interest on the mortgage can be used as income deduction so not the full 300, Council rates, accountant and legal fees, maintenance, and depreciation on chattels can also be tax deductible. So 350/week minus those things is subject to tax

[Ivan McIntosh]

It's not that your rent is subject to tax....your profit (in your case of the business - or maybe just of the land if you run the business and the landlordship of the property as separate entities) is subject to tax.

No disrespect is intended, because we were all at this stage once, but the nature of your question says you need an accountant to ask these kinds of questions and set you straight. If you don't, I can see you getting in all sorts of trouble. You might even keep them on...

[Rosco]

Hi Frazz,

You have to return all your rental income in your tax return (I'm presuming personal ownership) and then can claim expenses against this income. As above you can only claim interest on your loan, not principal repayments.

I recommend you see a professional to discuss how rental properties work, what you can and can't claim, and if your structure is set up well. You might find you can restructure to maximise deductions, but always consider the benefit vs cost.

We offer an initial meeting for $250 + GST normally, but discount to $150 + GST for people who come from Property talk. We can do this by skype or phone to make it easier. The initial meeting lasts around an hour and I can generally answer all your questions in this time.

Normally I would try to give a few pointers in a thread, rather than just promote myself, but you need to improve your level of understanding and knowledge, and there is too much to post in one thread.

Ross

[frazzledfozzle]

Thanks everyone You are right my level of knowledge when it comes to rentals and tax etc is very limited.

I have a problem absorbing facts and figures we have an accountant here in Nelson and are due to go in for our annual roundup of all things business.
I always come away feeling completely drained and have less clue about anything than when I went in ;(

Thankfully my husband has a brain for this type of thing and he dumbs it down for me so I can understand what went on

Believe it or not we have run a successful business with only myself and my husband working in it, Manual labour is my forte' my brain is a complete mystery to me

Cheers and thanks
frazz

[speights boy]

...my brain is a complete mystery to me

Fear not FF.
The other half of the population also has some difficulty understanding the inner workings of the female mind...

[frazzledfozzle]

Speightsboy thats really funny !

[essence]

It's easy really....

Declare ALL of the following-

Rents received
Payments made (insurance, rates, maintenance ie all costs in running the business etc etc)
Claim depreciation

The number at the end is either positive (you've made money this year.... wu-hu! oh hang on, tax to pay on this figure) or negative (dang...., potentially a loss is disbursed to shareholders)

You learn/absorb information differently, nothing wrong with that. You just need an accountant who can speak your information language.




My goal in life is to pay $1m in tax. Think about it people before you respond.

[KIMI]

Hi Rosco,

I am currently overseas and I also need some help with my tax situation and I was recently back home in NZ and I tried talking to an accountant but he wasnt very helpful and my time was limited so I didnt really have time to look for another one. I would be interested in talking to you, I tried to send you a message but your inbox is full. Please message me thanks.

[Rosco]

Hi Kim,

Hmmm, I will look at the inbox, presume you must mean the Property Talk one. I had never thought to empty it.

Otherwise [email protected] or look on www.cswaikato.co.nz

Ross

[Razzzor]

Okay so if the loan interest is tax deductable, is that the overall interest charged for the year, or only the interest that you actually pay off throughout the year (assuming I'm paying more principal than interest on my loan)?

[Pim]

You may only claim what you actually paid. and only if your property was available for rent for the full 12 months.

[essence]

You may only claim what you actually paid. and only if your property was available for rent for the full 12 months.

Almost right Pim.

You can only claim interest for the period the property is available for rent. So if you only keep it for six months then you can only pay six months rent, etc.

[Rosco]

Okay so if the loan interest is tax deductable, is that the overall interest charged for the year, or only the interest that you actually pay off throughout the year (assuming I'm paying more principal than interest on my loan)?

Hi Razzzor,

I found your question a bit confusing.

As you have put, loan interest is tax deductible.

Generally the overall interest charged for the year and the actual interest you pay will be the same thing. Even if you get behind, you will generally find that the interest is added to your loan, so effectively paid anyway.

It doesn't matter how much principal you are paying. It is only the interest charged that matters for tax purposes.

Ross

[Razzzor]

Hi Razzzor,

I found your question a bit confusing.

As you have put, loan interest is tax deductible.

Generally the overall interest charged for the year and the actual interest you pay will be the same thing. Even if you get behind, you will generally find that the interest is added to your loan, so effectively paid anyway.

It doesn't matter how much principal you are paying. It is only the interest charged that matters for tax purposes.

Ross

Ah I see, Thanks!