Short term rental

Question from Scott updated on 30th March 2012:

I am buying my first home to live in but I am buying it tenanted. Settlement date on the purchase is the start of April and the tenants will still be in the property till the end of July (so four months total I will be receiving rent) and then I will move in after that. Do I need to pay tax on this rent for these four months? If so, how can I calculate it and when/how do I follow this up with the IRD?

Our expert Mark Withers responded:

You are required to declare the gross rental income and may deduct the costs associated with earning it from the period it was actually rented. This will include interest on the mortgage, rates, insurance, property management fees and other property related costs. If the net result is a profit some tax may be payable. If the costs exceed the income a loss can be deducted that may result in a tax refund.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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