Are you planning to upgrade your property, or some parts of it? Did you know that you can deduct some of these costs? That’s right! You just need to know the best way to do it.
Firstly, it’s important to know the difference between an improvement and a repair to your investment property to determine whether the work completed is a deductible expense, or capital nature. Repairs can be written off immediately while an improvement may be written off over a longer period through depreciation. The amount of depreciation you can deduct per year varies depending on whether your property is commercial/residential and what the asset is.
To repair means to renew parts or fix defects, excluding total reconstruction. It also allows the property to be used in its current state. An improvement, on the other hand, provides a greater function to the property and makes it more desirable or valuable compared to repair. The improvement often extends the property’s income-producing ability and enhances its market value.
A renovator should focus on value instead of just tax because an improvement should increase rent and market value, which will be compounded over time.
You may also need to look at the size and frequency of the project to know whether it is a renovation expense – like replacing kitchen cupboards one at a time. If you replace all carpets and gutters at once, it is considered an improvement and could be depreciated. Note that different rates apply based on useful life, and whether the property is commercial or residential.
If you complete a repair before your property is first rented, the costs are considered an improvement because the purchase price will have taken into account the disrepair.
Improvements vs Repairs and Maintenance is a difficult topic (and the answer isn’t always black and white), so give us a buzz if you have any questions on anything mentioned above.
Your Outside Team
Need a bit of assistance with your business? Contact an Outside Accounting team member today and learn more about our fixed fees. You won’t regret it.
Aside from business consultation, we are business accountants Wellington who offer accounting, bookkeeping, payroll services designed to help you achieve greater financial success.
You can click here to speak to a business, accounting and bookkeeping firm. We will give you a call to know more about your needs. We will explain to you how we can improve your business.
Address: Level 2, 182 Vivian Street,
Te Aro, Wellington 6011, New Zealand
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975
As a business owner, reviewing your financial reports each month is essential for maintaining control and steering your business in the right direction. Here are six key reasons why you should prioritize this important task.
Starting your own business is exciting, but handling all the financial details can be overwhelming. Instead of spending your time managing the books, you could focus on growing your business. This is where expert accounting firms like Outside Accounting step in.
Choosing the right accounting software is crucial for your small business, and with so many options available, it can be challenging to decide which one is best. Xero Accounting Software stands out as a popular choice, but what makes it so special? In this article, we’ll explore six key benefits of using Xero for your small business. If you’re looking for a skilled, cost-effective accountant in Wellington to assist with your small business bookkeeping, reach out to the friendly team at Outside Accounting today.
Bookkeeping fraud, including embezzlement and theft from company accounts, can quietly drain your business’s resources for years before being discovered. The consequences can be devastating. This guide will explore how bookkeeping fraud happens and provide five effective strategies to protect your business from it.
Taking control of your small business’s financial operations is a critical step toward long-term success. With accurate financial planning and expert assistance, you can create a roadmap for expansion and growth within your industry. While managing small business finances may seem daunting, following the right steps can make the process both enjoyable and highly profitable.
As a small business owner, keeping a close eye on expenses is essential, and that includes accounting costs. You might wonder if your accountant’s fees are worth it or if you could handle it yourself using online accounting software.
ALL POSTS
NEWSLETTER SUBSCRIPTION