Depreciation lets you deduct the cost of business assets over their useful life. IRD sets specific depreciation rates for hundreds of asset types. Claiming the right rate maximises your deductions — and understanding when to expense assets immediately (low-value asset rule) versus depreciate them over time is essential for tax efficiency.
Assets costing $1,000 or less (excluding GST if you are GST-registered) can be claimed as an immediate deduction instead of being depreciated, with some conditions on how they were bought. Assets over $1,000 are depreciated over their useful life using IRD's prescribed rates. Two methods: Diminishing Value (DV, applied to the reducing book value each year) and Straight Line (SL, applied to the original cost each year). DV gives a larger deduction in early years; SL gives even annual deductions. Find exact rates at IRD's asset depreciation rate finder tool online.
The $1,000 Low-Value Asset Threshold
From 17 March 2021, assets costing $1,000 or less (excluding GST if you are GST-registered) can be claimed as an immediate deduction instead of being depreciated. This is the low-value asset threshold.
- No depreciation schedule required for those assets
- Claim the full cost as an expense in your IR3 or company return
- The write-off applies when the asset is not bought from the same supplier at the same time as other assets with the same depreciation rate
- You can instead group low-value assets into a pool and depreciate the pool
Examples of assets immediately expensed:
- Office chair ($450) — deducted in full
- Power tools under $1,000 — deducted in full
- Software subscription under $1,000/year — deducted as an expense
- Printer ($800) — deducted in full
Note: Up to 16 March 2020 the threshold was $500, and from 17 March 2020 to 16 March 2021 it was temporarily $5,000.
Diminishing Value (DV) vs Straight-Line (SL)
| Method | How it works | Best for |
|---|---|---|
| Diminishing Value (DV) | Rate applied to the reducing book value each year | Larger deductions in early years; asset becomes “used up” faster for tax |
| Straight Line (SL) | Rate applied to original cost each year | Even deductions; easier to calculate |
Example: $5,000 laptop, DV 50%, SL 40% (IR265 rates for laptop computers):
| Year | DV method | SL method |
|---|---|---|
| Year 1 | $5,000 × 50% = $2,500 | $5,000 × 40% = $2,000 |
| Year 2 | ($5,000 − $2,500) × 50% = $1,250 | $5,000 × 40% = $2,000 |
| Year 3 | ($2,500 − $1,250) × 50% = $625 | $1,000 (the remaining value) |
IRD says the total depreciation you can claim over an asset’s life is the same for both methods; DV claims more in the early years and SL claims the same amount each year.
For most assets the DV rate is higher than the SL rate. For some short-life assets, such as smartphones, the two rates are the same.
Common IRD Depreciation Rates 2025–26
Office and IT Equipment
Estimated useful life, DV rate and SL rate as published in IR265 (March 2026):
| Asset | DV rate | SL rate | Estimated useful life |
|---|---|---|---|
| Laptop computers | 50% | 40% | 4 years |
| Personal computers | 50% | 40% | 4 years |
| Printers | 40% | 30% | 5 years |
| Mobile phones, including smartphones | 67% | 67% | 3 years |
| Office furniture (default class) | 16% | 10.5% | 12.5 years |
| Desks | 13% | 8.5% | 15.5 years |
Vehicles
| Asset | DV rate | SL rate |
|---|---|---|
| Motor vehicles for transporting people (up to 12 seats; residual value estimated at 25%) | 30% | 21% |
| Light goods vehicles such as utes and vans (gross vehicle mass up to 3.5 tonnes) | 20% | 13.5% |
| Motorcycles | 30% | 21% |
| Medium goods vehicles (over 3.5 but not over 12 tonnes) | 16% | 10.5% |
| Heavy goods vehicles (over 12 tonnes) | 20% | 13.5% |
Note: Vehicle depreciation is limited by the motor vehicle cost threshold ($57,267 cost cap for PAYE and FBT purposes — applies to the depreciation base for vehicles used by shareholder-employees).
Building Fitout and Chattels
| Asset | DV rate | SL rate |
|---|---|---|
| Carpets (modular nylon tile construction) | 13% | 8.5% |
| Carpets (other than modular nylon tile construction) | 40% | 30% |
| Air conditioners (split system) | 20% | 13.5% |
| Air conditioning systems | 10% | 7% |
| Light fittings | 20% | 13.5% |
Rates for tools, machinery and industry-specific equipment depend on the industry, so they are not listed here.
For exact rates: Use IRD’s online depreciation rate finder at ird.govt.nz — search by asset type or industry.
How to Calculate Depreciation
Year 1
Depreciation = Cost price (excl. GST) × DV rate
Note: If the asset was only in use for part of the year, pro-rate by days:
Depreciation = Cost × DV rate × (Days held) ÷ 365
Subsequent Years (DV)
Depreciation = Book value at start of year × DV rate
Book value = Cost − total depreciation claimed to date.
GST-registered businesses
Calculate depreciation on the GST-exclusive cost (you have already claimed the GST as an input tax credit separately).
GST-excluded businesses (e.g., residential landlords) calculate depreciation on the GST-inclusive cost.
Depreciation on Sale — Recovery
When you sell a depreciated asset:
- Sale price > book value: Depreciation recovery = sale price − book value = taxable income
- Sale price < book value: Residual loss = book value − sale price = deductible
Example:
- Computer: cost $3,000, depreciated to book value of $800
- Sold for $1,200
- Recovery: $1,200 − $800 = $400 taxable
Frequently Asked Questions
I bought a laptop for $1,500. Can I still claim it all this year?
At $1,500 (excluding GST if you are GST-registered), it is over the $1,000 low-value threshold, so it is depreciated. At the 50% DV rate for laptop computers, the year 1 deduction is $1,500 × 50% = $750. A new laptop may also qualify for the 20% Investment Boost deduction in the first year, which changes these figures.
What if I use an asset partly for business and partly privately?
Apply the depreciation to the business-use proportion. A laptop used 70% for business: $1,500 × 70% = $1,050 depreciable base, then apply the DV rate.
My asset has fully depreciated (book value $0). Is there any tax if I sell it for $200?
Yes — the $200 is a depreciation recovery and is taxable income.
I can’t find my asset type on the IRD rate finder. What do I use?
If the specific asset is not listed, use the rate for the most similar asset. Alternatively, apply the default rate for the industry category. IRD’s guidance allows reasonable estimates for unlisted assets.