Rental Income Tax in New Zealand
How rental income is taxed in NZ — allowable deductions, interest deductibility rules, ring-fencing losses, and what landlords need to know for 2025-26.
Published 18 March 2026 · Reviewed by NZ Tax Tools Editorial Desk
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:
| Deduction | Details |
|---|---|
| Insurance | Landlord, contents, and natural disaster insurance |
| Rates | Local council rates for the rental property |
| Property management | Agent fees, advertising for tenants |
| Repairs & maintenance | Fixing existing items (not improvements) |
| Accounting fees | Tax return preparation for rental income |
| Legal fees | Lease preparation, tenancy disputes |
| Travel | Visiting the property for inspections (limited) |
| Body corporate fees | For apartments and units |
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, interest deductibility is being phased back in:
| Tax Year | Deductible Percentage |
|---|---|
| 2023-24 | 50% |
| 2024-25 | 80% |
| 2025-26 | 100% |
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) have always retained full interest deductibility.
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):
| Item | Rate |
|---|---|
| Carpet | 24% |
| Drapes/curtains | 16% |
| Stove/oven | 20% |
| Heat pump | 20% |
| Dishwasher | 20% |
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 all residential rental properties owned by the same person or entity
Portfolio basis: If you own multiple rental properties, gains and losses across all properties are combined. A loss on one property can offset a gain on another.
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 based on the number of days rented vs personal use vs unoccupied.
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.