Property investors can claim deductions for several expenses while their property is rented or available for rent. Knowing what you can claim will help not only to maximise your return but to avoid issues with the IRD.

Car expenses and mileage.

In general, you can claim vehicle and other travel expenses you incur in the course of performing business-related activities.

With weekly trips to different properties for open homes, viewings, inspections and maintenance call-outs, mileage can quickly add up. And although it can be inconvenient and time-consuming to manage record-keeping for all your business travel, it can save you some money.

The IRD provides a logbook template you can use.

You can either use the IRD's mileage rate or claim a percentage of the total running costs and depreciation. The kilometre rates are typically published after each tax year ends on 31 March.

Airfares and travel expenses

You can use airfares as your deduction, but you need to make sure that the trip was for business purposes. You may be asked to provide appropriate proof to justify the deduction. So it's important to keep detailed records - show why you visited and which dates. Keep any relevant correspondence in the lead-up and during the travel—anything to confirm that the trip was related to business and not a vacation.

What if a part of the trip was business-related, and another part was a vacation?

If you're flying somewhere to inspect a property and then fly back, it will be tax-deductible. But if you're flying there and extending your trip for a few nights, then only a proportion of this trip will be tax-deductible.

Let's say inspection visits are likely to be handled in a day, but you choose to stay in town for another day, only 50% of the airfare will be tax-deductible.

Small purchases under $1,000

Any assets/chattels that cost less than $1,000 can be claimed as a tax deduction in the year they're purchased.

For example, if you purchased a stove for $480, you can claim this deduction the same year you acquired it. But if you spent $1000 on the stove, you will have to depreciate it over the life of the stove.

This doesn't mean you should always buy chattels for $1,000 or under. But if in future you're considering several options around $1,000 mark, it is something to remember.

Low value asset threshold was set at $500 until up to 16 March 2020, then temporarily increased to $5,000 to assist with COVID-19 pandemic, but since has been reset to $1,000 from 17 March 2021 onwards.

Books, property magazines, subscriptions to associations, courses

Newspapers, magazines, books, local Property Investors Association fees - anything that you buy to keep up with what's going on in the industry, is a fully claimable expense.

Repairs and maintenance or improvements

In simple terms, repairs and maintenance are tax-deductible, but improvements are not.

If you are doing something to your property that improves its condition, it will be considered an improvement. So if you buy a rundown property and make changes to it to improve its condition, it will be viewed as an improvement.

Just because you can't get a tax advantage doesn't mean you shouldn't do it. Renovating your property is likely to increase its capital value, lead to more interest from tenants, improve the quality of tenants your property attracts and allow you to borrow more money against the property in future.

If you've recently upgraded or installed new insulation, you may be wondering if the associated costs can be claimed at tax return time. To answer, you need to determine if the carried out works were repairs or improvement. We've covered this topic in detail in this aricle.

Chattels attached to the property can't be depreciated

Chattels attached to the property can't be depreciated. This applies to fitted furniture, kitchens, wardrobes etc.

If the assets not connected to the property, then they can be depreciated. Things like fences, driveways, carports, paving stones, some decks (depending on how they are attached to the house) are still able to be depreciated.

Some chattels are not attached to the property but form an integral part of the property, and the tenants are unlikely to rent the property without them, e.g. toilet or kitchen cabinets (but not bathroom cabinets). These items cannot be depreciated.

Learn more about claiming depreciation on the rental property

If you ever in doubt whether you can claim something as a tax deduction or not, please contact your local accountant for advice.