What Can a Landlord Claim on a Rental Property in NZ?
What can a landlord actually claim on a rental property in NZ?
The short answer: you can deduct the running costs of earning the rent — mortgage interest in full from 1 April 2025, council rates, insurance, property manager fees, repairs and maintenance, accounting fees, and depreciation on chattels. You cannot deduct the purchase price, loan principal, improvements that add to the property, or depreciation on the building itself. Losses are ring-fenced to rental income. (Rules read from the IRD website, 3 September 2026.)
Auckland landlords lose money in two ways: claiming things that are not deductible and then facing a reassessment, or not claiming things that are. Here is the line, item by item.
Which expenses are deductible and which are not?
| Deductible | Not deductible |
|---|---|
| Mortgage interest (in full from 1 April 2025; 80% for 1 April 2024–31 March 2025) | Mortgage principal repayments |
| Council rates and water rates | The purchase price of the property |
| Landlord and building insurance | Additions and improvements that enhance the property beyond its state at purchase |
| Property manager fees: rent collection, tenant finding, maintenance coordination | Real estate agent fees on buying or selling |
| Repairs and maintenance that restore the property to its previous state | Repairs or replacements that increase the property's value |
| Accounting fees for accounts, tax returns and advice | Legal fees for selling the property |
| Mortgage arrangement fees; tenancy agreement costs | Interest on money borrowed for non-rental purposes |
| Legal fees to buy the rental, if total legal fees are $10,000 or less | Depreciation on land or buildings |
| Depreciation on chattels (carpet, blinds, heat pump, appliances) | Your own labour on repairs |
| Travel to inspect or repair the property; eviction and rent-recovery costs | Costs of your main home |
How is the interest rule working now?
The interest limitation rules have been unwound. Inland Revenue's current page states: from 1 April 2025 you can claim the interest you incur in full; for 1 April 2024 to 31 March 2025 you could claim 80%; and for earlier years the date you borrowed determined whether interest was claimable at all. In practice that means the 2026 tax year (ended 31 March 2026) is the first full year of unrestricted interest deductions for most Auckland landlords. If you are still holding earlier-year returns with interest add-backs, those figures are correct for those years and should not be amended.
Interest is deductible only on borrowing used for the rental. If you redrew against the rental to pay for a holiday or a private car, that part of the interest is out.
Repair or improvement — how do I tell?
This is the judgement call that decides most rental tax disputes. IRD's test:
- Repairs and maintenance restore the property to its previous state, including work to fix or prevent damage or deterioration. Deductible in the year.
- Capital improvements add to the property and enhance it beyond its original state at the time of purchase. Not deductible; they form part of the property's cost.
Replacing a rotten deck board is a repair. Replacing the whole deck with a larger composite one is an improvement. Repainting is a repair; adding a second bathroom is an improvement. A single renovation invoice often contains both, and splitting it properly is where an accountant pays for the fee.
What about depreciation?
You cannot depreciate the building or the land. You can depreciate chattels — carpet, curtains and blinds, heat pumps, stoves, dishwashers, and similar items — at Inland Revenue's published rate for each asset class. Items costing $1,000 or less (the low-value asset threshold, in force from 17 March 2021) can be written off in full in the year of purchase rather than depreciated. A chattels schedule prepared when you buy the property, and kept up to date, is one of the simplest ways to make sure nothing is missed.
Can a rental loss reduce my salary tax?
Generally no. Residential rental deductions are ring-fenced: you can claim deductions up to the amount of rental income in the year, and any excess is carried forward to be used against future residential rental income, not against salary or wages. Excess deductions can be released in limited circumstances, such as a taxable sale of the property — a boundary case we look at property by property.
Does the bright-line test still matter?
Yes. For property sold on or after 1 July 2024, the bright-line test asks whether the sale falls within 2 years of your bright-line start date (usually the settlement date when you bought). If it does, the gain is taxable income unless an exclusion — such as the main home exclusion — applies. Whether a specific sale is inside or outside the test, and whether an exclusion applies, is a fact-specific question; if you are considering selling, that is worth a proper look before you sign.
See our rental property accounting service — rental financial statements are $350 +GST per property — and tax and GST returns.
FAQ
Can I claim mortgage interest on a rental property in NZ in 2026? Yes. Inland Revenue's current rule is that from 1 April 2025 you can claim the full interest incurred on borrowing used for the residential rental. For the year 1 April 2024 to 31 March 2025 the claimable share was 80%. Interest on borrowing used for private purposes is not claimable.
Is a new kitchen a repair or an improvement? Usually an improvement, because it enhances the property beyond its state when you bought it, so it is not deductible in the year. Repairing or replacing a broken benchtop like-for-like is a repair. Most renovation invoices contain both, and the split has to be documented item by item.
Can I claim the cost of my own time fixing the rental? No. Inland Revenue lists the owner's labour on repairs and maintenance as not deductible. Materials you buy for a genuine repair are deductible; the tradesperson's invoice is deductible; your own weekend is not. Travel to inspect or repair the property can be claimed.
Can my rental loss offset my wages? Generally not. Residential rental deductions are ring-fenced to residential rental income, and any excess is carried forward to later years. There are limited situations, such as a taxable sale, where excess deductions can be released, and those need to be assessed for the specific property.
How long is the bright-line period now? Two years for property sold on or after 1 July 2024, measured from your bright-line start date to your bright-line end date. Sales inside the period are taxable unless an exclusion applies, the main home exclusion being the most common. Sales before 1 July 2024 were subject to different periods.
Talk to us
If you own one rental or ten, a free 15-minute consultation will tell you quickly whether your claims are complete and correctly split. Call 021 202 4028, email info@optimalaccountants.co.nz, or use our contact page. Optimal Accountants Limited, Rosedale, Auckland — Chartered Accountant, CA ANZ member, English and Mandarin.