If you're a property owner in New Zealand, understanding what expenses you can claim is crucial for maximising your investment returns. One common question is “are property management fees tax deductible?” The answer is yes, but let's break it down so you know what counts.
Yes, Property Management fees are tax deductible
According to Inland Revenue (IRD), property management fees are an operating expense for landlords and investors. Property Managers are considered agents who provide services such as tenant acquisition, rent collection, property maintenance oversight, and ensuring legal compliance. As long as these services are directly related to earning rental income, they can be deducted from your taxable income.
What services do property management fees cover?
Typical services included in property management fees are:
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Tenant screening - conducting background checks and vetting potential tenants
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Marketing - advertising your property and handling inquiries.
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Rent collection - ensuring timely rent payments and managing arrears.
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Maintenance and repairs - coordinating necessary upkeep and addressing issues promptly.
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Legal compliance - ensuring the property meets all legal and regulatory requirements.
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Communication - acting as a liaison between you and your tenants.
These services are essential for the day-to-day operation of a rental property and contribute to its profitability.
How we support owners with record keeping
To make managing your tax obligations easier, we provide all our owners with an annual statement at the end of the financial year summarising property management fees and other deductible expenses.
In addition, we send monthly account statements along with any invoices for repairs and maintenance. This ensures you have a complete, up-to-date record of all expenses for your rental property, making tax time straightforward and stress-free.
Make sure you keep all invoices and receipts related to property management services. These documents serve as evidence should the IRD do an audit.
Are there other rental property expenses that are deductible?
In addition to property management fees, landlords can typically deduct other expenses related to their rental property, including:
- The interest part of mortgage repayments
- Costs incurred for necessary repairs and maintenance such as replacing a broken window, repainting the house or repairing holes.
- Local Council rates and insurance
- Legal fees associated with lease agreements and tenancy disputes.
What expenses are not deductible?
While many expenses are deductible, some are not. These include:
- Costs incurred to buy or increase the value of the property, such as improvements that add value or enhance it beyond its original state like adding an extra room or installing double glazing.
- Principal portion of mortgage repayments.
- Depreciation on the rental property and its land.
- Your time when you do repairs and maintenance work.
You can find the full list of expenses you can deduct and not deduct on the IRD website.
Consult a Professional
We highly recommend seeking advice or working with a tax advisor or accountant who specialises in rental properties. They can advise on the difference between capital and operating expenses, and make sure you are maximising your deductions and ensuring compliance with tax laws.