Rental Income Tax in New Zealand

Owning a rental property in New Zealand comes with tax obligations. Rental income is taxable, but you can claim deductions for legitimate expenses. Here’s what landlords need to know.

Rental Income is Taxable

All rental income you receive must be included in your annual tax return. This includes rent payments, letting fees recovered from tenants, and any insurance payouts for lost rent. Rental income is added to your other income and taxed at your marginal rate.

Allowable Deductions

You can deduct expenses that are directly related to earning rental income:

Important distinction: Repairs maintain the property’s condition and are fully deductible. Improvements increase the property’s value or function and must be depreciated over time (if depreciable at all).

Interest Deductibility

The rules around mortgage interest deductibility have changed significantly in recent years:

Current Phase-In (2025-26)

For residential rental properties, the interest limitation rules cut deductibility from 1 October 2021 and were then reversed. The percentages below are for loans borrowed before 27 March 2021 (loans borrowed later could not claim interest from 1 October 2021 to 31 March 2024):

From the 2025-26 tax year, 100% of mortgage interest on residential rental properties is deductible again. This is a significant change from the previous government’s policy which was phasing interest deductibility out entirely.

New builds (properties with a code compliance certificate issued on or after 27 March 2020) were always exempt from the interest limitation rules (which ended on 31 March 2025, so all residential property is now 100% deductible).

No Building Depreciation

Since 2011, you cannot claim depreciation on residential buildings. This applies to the building structure itself. However, you can still depreciate chattels (appliances, carpets, curtains, blinds) that are part of the rental property.

Chattels Depreciation

Common chattels and their depreciation rates (diminishing value):

To confirm the rate for a specific chattel, use the IRD depreciation rate finder for 2025-26.

Ring-Fencing Rental Losses

Since the 2019-20 tax year, residential rental losses are ring-fenced. This means:

• If your rental expenses exceed your rental income, the loss cannot be offset against your other income (salary, business income, etc.)
• Instead, the loss is carried forward and can only offset future rental income
• This applies to residential rental properties owned by the same person or entity, except your main home, property held on revenue account, mixed-use assets, employee accommodation and most non-close companies

Portfolio basis: If you own multiple rental properties, gains and losses across all properties are combined by default — this is automatic, you don’t need to elect into it. A loss on one property can offset a gain on another. You can instead elect a property-by-property basis on your tax return, which tracks each property’s gains and losses separately (only released against that same property’s future income or its own taxable sale). See Rental Loss Ring-Fencing 2025-26 for the full mechanics.

Mixed-Use Properties

If you use the property partly for personal use (e.g., a holiday home you also rent out), expenses must be apportioned by days: income-earning days divided by income-earning days plus other days in use (personal use); unoccupied days are ignored. This applies when the property is unused for 62 days or more.

Filing Requirements

Rental income is reported in your individual tax return (IR3). You’ll need to keep records of all income received and expenses paid. IRD recommends keeping records for at least seven years.

Estimate Your Rental Tax

Use our Rental Income Tax Calculator to estimate the tax on your rental property income, including interest deductibility and expense deductions.