Depreciation

[fuzzlevalve]

If I buy kitchen very cheap and put into rental property, can I get it valued and depreciate off real value or only what I pay?

[Anthonyacat]

With any asset, you can only depreciate what you pay - never more.

If the "very cheap kitchen" is going into a rental property that doesn't currently have a kithen (ie, new build or upgrade from a kitchenless unit), most of it won't be deductible at all - pretty much just the appliances really. If it's a replacement of an existing kitchen, you can *probably* claim the whole purchase in the year of payment as a repair, but there are some tests to meet. If there are significant upgrades involved, it's probably not deductible.

[fuzzlevalve]

OK thank you.

[richard56]

Hi
Just as an extra question if I may.?

For those of you who could claim depreciation on their property's...back when you could.

How did you decide between....

1...claim depreciation each year then pay it back when you sell property

2...don't deprecate at all and therefore you don't pay and thing back when you sell the property.

Was it a case of "pay now or pay later" ?

Thanks

Richard

[Anthonyacat]

That was an individual choice. Most people chose to go with the tax refund now and tax to pay eventually. Especially long term investors who were expecting to hold until or after retirement years. Why wouldn't you take an interest-free loan from the IRD? Your tax rate may well be lower when you sell, so you end up paying less back!