Maximising your allowable rental property deductions reduces your taxable income and your tax bill. New Zealand landlords can claim a wide range of expenses — but the rules around repairs vs capital improvements, and the recently restored interest deductibility, are critical to get right.
Key landlord deductions: mortgage interest (100% from 1 April 2025), council rates, insurance, property management fees, repairs and maintenance (revenue items), depreciation on chattels, accounting fees, and advertising. Building depreciation is not allowed. Capital improvements must be capitalised, not expensed. Keep your rental records for at least 7 years.
Full List of Deductible Expenses
Mortgage Interest
Deductible: 100% from 1 April 2025
After years of restrictions, you can claim 100% of the interest on borrowing for a residential rental property from 1 April 2025.
Only the interest portion of your mortgage payment is deductible — principal repayments are not. Check your annual mortgage statement from your bank, which breaks down interest paid.
Council Rates
Deductible: 100%
Council rates for the rental property are deductible when the property is not used privately.
Insurance
Deductible: 100%
- Building insurance
- Contents insurance (for furnished rentals)
- Landlord protection insurance (covers loss of rent, tenant damage)
- Public liability insurance
Property Management Fees
Deductible: 100%
Fees paid to a property management company to find tenants, collect rent, and manage the property are fully deductible. This is one of the cleanest deductions — keep invoices from your property manager.
Repairs and Maintenance
Deductible: 100% for revenue repairs
Repairs that restore the property to its original condition are deductible. Capital improvements are not (see section below).
Deductible repairs:
- Fixing a leaking roof (like-for-like repair)
- Repainting walls
- Replacing a blown element in a hot water cylinder
- Fixing a fence
- Replacing broken tiles
- Plumbing repairs
- Electrical repairs
Depreciation on Chattels
Deductible: Yes (at IRD rates)
Furniture, appliances, and fittings are depreciable at IRD’s set rates. The building itself is not depreciable.
Common chattel depreciation rates (items acquired on or after 1 April 2011):
| Item | Rate (diminishing value) |
|---|---|
| Carpet | 25% |
| Curtains / blinds | 25% |
| Dishwasher | 30% |
| Fridge/freezer | 25% |
| Heat pump (through wall or window type) | 20% |
| Stove / oven | 25% |
| Washing machine | 30% |
| Furniture (loose) | 20% |
Items costing up to $1,000 each can be claimed in full as an expense when you buy them.
Accounting and Tax Agent Fees
Deductible: 100%
Fees paid to an accountant or tax agent for preparing your rental accounts and filing your IR3 are fully deductible.
Advertising for Tenants
Deductible: 100%
Costs of advertising for tenants, such as TradeMe listing fees, are deductible.
Legal Fees
Deductible: Depends on purpose
- Tenancy Tribunal costs to recover unpaid rent or evict a tenant: deductible
- Drawing up a tenancy agreement: deductible
- Legal action to recover unpaid rent: deductible
- Legal fees for buying a rental property: deductible if the expense is $10,000 or less
- Legal fees for selling a rental property: not deductible (unless you are in the business of providing residential rental accommodation)
Body Corporate Fees
Deductible: Depends on what the levy pays for
For apartments and unit title properties. General levies for maintenance or administration are normally deductible, but levies raised to pay for capital improvements are not. If a levy covers both, you can only claim the part that relates to repairs.
Travel to the Property
Deductible: Proportional
If you travel to inspect, maintain, or manage your rental property, you can claim vehicle costs (at IRD’s mileage rate or logbook proportion). Keep a log of trips, noting the business purpose.
If you combine an inspection with a personal trip, only the business component is deductible.
Bank Fees and Charges
Deductible: Business-related fees only
Annual card fees and account fees for a dedicated rental bank account are deductible. Fees for arranging a mortgage to finance the rental property are deductible, and break fees on a rental loan may be too under IRD binding rulings.
What Landlords Cannot Claim
| Expense | Why not deductible |
|---|---|
| Principal mortgage repayments | Capital in nature — only interest is deductible |
| Building depreciation | Removed in 2011 for residential buildings |
| Capital improvements | Capital expense, so not deductible as repairs; only depreciable items (such as chattels) can be depreciated |
| Personal use portion | If property is partly personal use, only the rental proportion is deductible |
| Purchase price and real estate agent fees on buying or selling | Capital in nature, so not deductible (legal fees are covered under Legal Fees above) |
| GST on expenses | Residential rent is exempt from GST, so you cannot claim GST on long-term rental expenses; deduct the GST-inclusive amount |
Repairs vs Capital Improvements: The Critical Distinction
The difference between repairs and capital improvements can be complex.
| Revenue repair (deduct now) | Capital improvement (capitalise) |
|---|---|
| Replace a blown element in the hot water cylinder | Upgrade to a larger/better HWC |
| Repaint walls same colour | Repaint + add new texture/feature wall |
| Fix broken fence | Replace fence with new higher-spec one |
| Replace a broken shower head | Install heat pumps where none were present |
| Repair roof leak | Re-roof with different material |
The test: Does the work restore to original condition (repair), or create something new or significantly better (capital)?
If you are unsure whether work is a repair or a capital improvement, IRD suggests keeping records of the spending and talking to a tax agent.
Mixed-Use Properties
If part of your property is rented and part is your principal home (e.g., you rent a room or a unit on the same section), you must apportion expenses between the rental and private use portions.
Apportionment is typically done by floor area:
- If 30% of the floor area is used only by tenants, 30% of shared costs such as rates can be claimed. Shared areas such as a lounge or bathroom count at half, and the total is then reduced for the days the property was not rented.
Keeping Records
You must retain evidence of all claimed deductions for at least 7 years:
- Bank statements (automatic)
- Invoices from tradespeople
- Property management statements
- Insurance renewal notices
- Council rates invoices
- Mortgage interest statement from your bank
A spreadsheet or simple accounting software is usually sufficient for one or two properties. For multiple properties, consider dedicated property management accounting software.