Tax for rental properties

If you own rental property the tax you should pay will depend on whether you are a residential rental investor or a dealer in residential rental properties.

Rental property investors buy property and use it to generate on-going rental income, without any firm intent of resale. Investors pay income tax on their net rental income but generally not on the eventual sale proceeds of the property.

Property speculators buy a property always intending to sell it. Property dealers have established a regular pattern of buying and selling property. Both speculators and dealers must pay income tax on any gain they make from reselling property, even if they rented it out before it was sold. They must also pay tax on rental income and GST may be applied. You can deduct expenses like rates, insurance, and maintenance from rental income.

Speculators and dealers can usually claim the cost of a property in the year it's sold. Specific tax rules apply for holiday houses that are occasionally rented out. See Tax rules for holiday homes (IR1021). You can find out more in Tax and your property transactions (IR361).