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  1. #11
    Join Date
    May 2008
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    3,581

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    I didn't think that applies in Sam's case.
    He's changing the use of a property.
    He didn't start off with the purchase of a rental.
    Here's a quote from IRD:
    You can claim the interest charged on money you've borrowed to buy your rental property
    Sam never borrowed money to buy his rental.
    I thought this had a major impact on the deductibility of the mortgage interest.
    This was the case several years ago - has IRD changed the rules recently?
    I do notice that renting the house will drag it into the bright line requirement.

  2. #12
    Join Date
    May 2004
    Posts
    2,796

    Default

    The worked example given in IR264 is as below, and has been the case for years.

    You own a property and live in it for the first three months of the year. You then
    rent it out for the rest of the year. The cost of rates, insurance and interest for the
    year is $9,230. To work out your rental income for the year, deduct the ongoing
    costs for the nine months the property was rented out, that is, 9/12ths of the
    expenses.

  3. #13
    Join Date
    May 2008
    Posts
    3,581

    Default

    I stand corrected.
    Ignore what I've said.

  4. #14

    Default

    Quote Originally Posted by Bob Kane View Post
    1. I think a good property accountant could work a way to get the interest deductible - perhaps taking out another mortgage and paying off the original mortgage. Or variations of that.
    2. Expenses would be deductible.

    As an aside, you don't 'convert' a house to a rental.
    You just rent it out whenever you want.
    Claiming expenses off the rental income is the tricky part - IRD may turn down your claims and then tax you on the rental income - the worst outcome.
    There's a few accountants on PropertyTalk - offer them some $$$ for advice as they are invaluable on tax matters related to property.
    Contact Rosco - he's good.
    Hi Thanks for reply. I Live in north shore Auckland. Do you know good property accountant that you can recommend. Thanks

  5. #15
    Join Date
    May 2008
    Posts
    3,581

    Default

    Try:
    Rosco cswaikato.co.nz
    PABAL - pabaco.nz
    Anthonyacat - aataccounting.co.nz
    GRA gra.co.nz

    Don't worry about location and having face to face meetings with your accountant.
    You're not dating them.
    I haven't visited an accountant in 15 years.
    Last edited by donna; 29-04-2019 at 05:40 PM. Reason: removed active urls so thread can stay out of CE forum

  6. #16

    Default

    Best advice is get it from the property accountant expert. Tony Thorne has first hand knowledge for everything to do with tax and property :

    thorneaccounting.co.nz
    Last edited by donna; 29-04-2019 at 05:40 PM.

  7. #17
    Join Date
    Aug 2003
    Posts
    7,638

    Default

    There is the LVR rule for borrowing to consider too, so if you buy as PPOR and take advantage of borrowing more and then change it to a rental - not sure what happens, if you don't let your lender know. I guess they could take your funding away? Or just do a valuation and get you to top up if required. e.g. you may have borrowed 80% or more, and rentals are 70% or less.

    cheers,

    Donna
    PropertyTalk Blog - property articles

    BusinessBlogs - the best business articles are found here



  8. #18

    Default

    Hi Donna, I had a chat with my bank. The answer was: as long as you say I am buying a house to live in and later changed my mind the bank will not do anything as they can't control people and their circumstances.

    Now,the question is, I purchased a house and immediately after settlement day I rented the house. I am able to have the mortgage interest to be deductible? I put a deposit of 28% towards the house.

    Cheers,
    Sam
    Quote Originally Posted by donna View Post
    There is the LVR rule for borrowing to consider too, so if you buy as PPOR and take advantage of borrowing more and then change it to a rental - not sure what happens, if you don't let your lender know. I guess they could take your funding away? Or just do a valuation and get you to top up if required. e.g. you may have borrowed 80% or more, and rentals are 70% or less.

    cheers,

    Donna

  9. #19

    Default

    Hi Bob, Now,the question is, I purchased a house and immediately after settlement day I rented the house. I am able to have the mortgage interest to be deductible? I put a deposit of 28% towards the house.
    Cheers,
    Sam
    Quote Originally Posted by Bob Kane View Post
    I stand corrected.
    Ignore what I've said.

  10. #20
    Join Date
    May 2008
    Posts
    3,581

    Default

    It would appear so - yes, interest payments will be deductable.


 

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