Tax deductibility from US

Question from Jen updated on 22nd May 2015:

I currently live in the US and rent out a property in Wellington. The property does not make any money and I have to top up the mortgage every month. Recently the house has needed some expensive work done (new water heater, painting etc). I understand I cannot claim the expenses back as there is no income to claim it against, but can I claim back the GST? If so how would I go about this, should I set the property up in a trust?

Our expert Mark Withers responded:

Because the property is deriving income in NZ, you will still be required to file a tax return in NZ even if the result is a loss from the rental property. The costs on the property are deductible if they are revenue account maintenance costs rather than capital expenditure on the property. Residential property rental is an exempt activity for GST so there is no ability to register and claim GST input costs. The GST inclusive cost is the expense that is deducted for income tax purposes. If losses are claimed they will accumulate and be available to offset any profits in future from the NZ derived income. You should also take tax advice in the US to determine what implications exist in the US, which is likely to look to tax your worldwide income if you are a US citizen or green card holder.

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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