NZ rental property tax explained: 100% interest deductibility from 1 April 2025, what you can claim, ring-fencing, depreciation and the IR3R return.
By the Find an Accountant NZ team · Facts checked against the sources listed below on 18 October 2026.
If you own a rental property, the tax rules have shifted almost every year since 2021. Mortgage interest went from deductible to partly deductible and back again, and losses can no longer be used against your salary. This guide sets out the current rules, what you can and cannot claim, how depreciation works, and how the IR3R rental schedule fits into your return.
Yes, again. Under IRD's interest limitation rules, you can claim 100% of the interest on money borrowed for a residential rental from 1 April 2025 onwards. That means it applies from the tax year ending 31 March 2026. For 1 April 2024 to 31 March 2025, the limit was 80%, no matter when you bought the property or drew down the loan. For the 2022, 2023 and 2024 returns, the answer depended on when you borrowed the money, so an amended return for those years needs care.
Two limits still apply. The interest must not be private, and the loan must have been used to fund the rental. If one loan funds both your home and a rental, you claim only the rental share, according to IRD's Rental income guide (IR264). Interest on money borrowed for something else is not deductible, even if the rental is the security, according to IRD's rental expenses page.
IRD's list of deductible rental expenses includes:
You cannot deduct the purchase price, the principal part of your mortgage payments, real estate agent fees on buying or selling, improvements or additions, depreciation on the land or building, or a value for your own time.
The line between a repair and an improvement causes most disputes. A repair puts the property back the way it was, such as fixing a broken window or repainting. An improvement adds something new, such as a new room, a heat pump where there was none, or double glazing. IRD suggests keeping records of all spending and talking to a tax agent if you are unsure.
Under the residential property deduction rules, often called ring-fencing, your rental deductions for a year are capped at your residential rental income for that year. Any excess is carried forward to a later year when the property makes income. You cannot use it against salary, wages or business income.
The rules apply whether you own the property yourself, through a partnership, as a shareholder in a look-through company or close company, or as a trustee. They do not apply to your main home, to holiday homes covered by the mixed-use asset rules, or to property that will be taxed on sale whenever it is sold (if you tell IRD). If you have more than one rental, you choose between a portfolio basis, where losses on one property can be set against profit on another, and an individual property basis, where they cannot. IRD recommends getting professional advice on which basis to use.
Residential buildings with an estimated useful life of 50 years or more depreciate at 0%, and have done since the 2011–12 income year, according to IR264. You can still depreciate chattels such as carpets, curtains, heat pumps, ovens and dishwashers, at the rates IRD sets, using either the diminishing value or the straight-line method. According to IRD's depreciation page, assets under the $1,000 low-value threshold can be deducted straight away. A depreciation schedule is the list of each asset, its cost, rate and adjusted tax value. You need to keep it so your claims carry forward correctly.
From the 2022 income year, property you rent out for short stays counts as residential land for ring-fencing, unless it is your main home. Short-stay letting is also a taxable activity for GST. IRD's GST and rental guidance says you must register if your total turnover from all taxable activities goes over $60,000 in a 12-month period. From 1 April 2024, platforms such as Airbnb and Bookabach collect and pay the GST on bookings made through them. Long-term residential rent is exempt from GST, so you cannot claim GST on those costs. See our GST guide for more.
A holiday home that is used privately and also earns income, and sits unused for 62 days or more in the year, falls under the mixed-use asset rules. Under those rules, expenses are split between private and income-earning use.
The Rental income – IR3R schedule works out your net rental income and deductions. You need one for each rental property. If you co-own, you enter only your share. Filing it in myIR pre-fills the rental figures in your income tax return, but checking them is still your responsibility. Individuals file an IR3, partnerships and look-through companies file an IR7, and trusts file an IR6.
Returns without an extension are due by 7 July. If you use a tax agent, IRD can grant an extension of time, which pushes the filing date out as far as 31 March of the next year. Under IR264, any tax to pay is due by 7 February, or 7 April if your agent has an extension of time. Rental records must be kept for 7 years. If your tax bill at year-end goes over $5,000, provisional tax may follow. See our provisional tax guide.
If you sell a residential property on or after 1 July 2024, the profit is taxable if the bright-line end date falls within 2 years of the start date, unless an exclusion such as the main-home exclusion applies, according to IRD's property rules. A sale outside that period can still be taxed if, for example, you bought with the intention of selling, or you have a pattern of buying and selling.
An accountant is worth considering if you own more than one rental, have short-stay or mixed private and rental use, are doing major work where the repair-or-capital question matters, are restructuring ownership, or are selling within the bright-line period. Ownership choices such as your own name, a look-through company or a trust each have different tax and legal consequences. That is a decision to make with professional advice for your situation.
Look for a firm that does this work every week, not once a year. Some questions are worth asking before you sign up:
Compare local firms on our rental property accountants in Hamilton page, and read how to choose an accountant for a fuller checklist.
This guide is general information, not tax or financial advice. Talk to an accountant about your situation.
For residential rentals, IRD allows 100% of interest incurred from 1 April 2025, which applies from the tax year ending 31 March 2026. For 1 April 2024 to 31 March 2025 the limit was 80%. The loan must have been used for the rental and the interest must not be private.
Generally not. Under the residential property deduction (ring-fencing) rules, excess rental deductions are carried forward and used against future residential rental income, not against salary or wages.
Not the building itself. Residential buildings with an estimated life of 50 years or more depreciate at 0%. You can depreciate chattels such as carpets, curtains and appliances.
Yes. IRD says you need a separate IR3R for each rental property. If you co-own, you enter only your share of the income and expenses.
All 1671 firms, ordered by the same published criteria.