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 for 2025–26: mortgage interest (100% — fully restored), 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 all receipts for 7 years.
Full List of Deductible Expenses
Mortgage Interest
Deductible: 100% from 1 April 2025
Mortgage interest is the largest deduction for most landlords. After years of restrictions (phase-out under Labour, phase-back under National), interest is now fully deductible for all residential rental properties 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%
All council rates (general rates, water rates, targeted rates) for the rental property are fully deductible.
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 broken hot water cylinder with an equivalent unit
- 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:
| Item | Rate (diminishing value) |
|---|---|
| Carpet | 25% |
| Curtains / blinds | 25% |
| Dishwasher | 25% |
| Fridge/freezer | 20% |
| Heat pump | 12.5% |
| Stove / oven | 20% |
| Washing machine | 26% |
| Furniture | 18% |
Items under $1,000 each can be written off in full in the year of purchase.
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%
TradeMe listing fees, photography costs, signage, or any other advertising to find tenants is deductible.
Legal Fees
Deductible: Depends on purpose
- Tenancy tribunal costs: deductible
- Lease preparation / renewal: deductible
- Debt collection (unpaid rent): deductible
- Legal fees for purchasing or selling property: capital in nature — not deductible as an expense (add to cost base)
Body Corporate Fees
Deductible: 100%
For apartments and unit title properties. Both operating levies and long-term maintenance fund contributions are deductible when they are expensed (not when they are accumulated in a fund).
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. Home loan application fees and break fees may be deductible over the term of the loan.
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 | Must be capitalised; deduct via depreciation or add to cost base |
| Personal use portion | If property is partly personal use, only the rental proportion is deductible |
| Purchase costs (stamp duty equivalent, legal) | Capital in nature — part of cost base, not current expenses |
| GST on expenses | You claim GST separately (residential rental is GST-exempt; no GST return filed) |
Repairs vs Capital Improvements: The Critical Distinction
This is the most common area of landlord tax errors.
| Revenue repair (deduct now) | Capital improvement (capitalise) |
|---|---|
| Replace like-for-like (same HWC) | 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 broken carpet | Install underfloor heating for first time |
| 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)?
When in doubt, the safe approach is to capitalise and depreciate — this avoids IRD reclassifying your deduction.
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 home is rented, 30% of shared costs (rates, insurance, interest) are deductible.
Keeping Records
You must retain evidence of all claimed deductions for 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.