Tax Free Boarder Income

For those of you looking to supplement your income, a good way to do this is by taking on a boarder.  Before doing this, you need to consider the tax rules.

If you are justing renting out a self-contained part of your house or just have flatmates, those tenants probably won't qualify as boarders. To provide boarding services is to provide all activities in respect of accommodation and associated care including meals, laundry and utilities. If your tenants buy their own food then you're not providing a boarding service.

If you do have a boarder living with you, you could treat the rent as income and claim a portion of the food, house costs and utilities. However, this would be extremely difficult to calculate.  So, the IRD have a standard amount that a boarder will cost.  If the amount you charge the boarder is equal to or less than that amount, then you don't need to include that rent in your tax return.  That is, you won't have to pay any income tax but you also cannot claim any tax loss.

For example, if you had 1 or 2 boarders in the 2013 tax year, you can charge $250 a week to each boarder without having to pay any tax. If you had 3 or 4 boarders in the 2013 tax year, then you can charge the 3rd and 4th boarders $204 a week without having to pay any tax. If you have 5 or more boarders, then these rules don't apply to you.

Tax Year 1-2 Boarders 3-4 Boarders
2009 $227 $185
2010 $232 $189
2011 $243 $198
2012 $247 $202
2013 $250 $204
2014 $250 adjusted for inflation $204 adjusted for inflation

Disclaimer: The above article is general in nature and we recommend you seek professional advice tailored to your specific personal situation.