Rental Income Tax for NZ Landlords (2025–26): Deductions, Ring-Fencing and Records

If you own a rental property in New Zealand, the tax side is not complicated, but it is unforgiving of missing records. This guide walks through what Inland Revenue expects from a residential landlord for the 2025–26 tax year, what you can deduct, and how to keep the paperwork so the return takes an hour instead of a weekend.

The tax year and the form

New Zealand's tax year runs from 1 April to 31 March. Individual landlords report rental income on the IR3 income tax return, with the property detail going on the IR3R rental income schedule. If you own the property through a trust, company or partnership, the same figures flow into that entity's return instead. Returns are generally due by 7 July, or later if you use a tax agent with an extension of time.

The IR3R asks for four things per property: total rent received, total expenses by category, the resulting profit or loss, and some ownership details. Everything below is about getting those numbers right.

What counts as rental income

Rent is the obvious one, but income also includes any other money you receive because of the tenancy: bond money you retain for damage, payments from a tenant for utilities that you paid on their behalf, and insurance payouts for lost rent. Rent is counted when it is received in the tax year, not when it was due. If a tenant is in arrears on 31 March, the unpaid amount is not income until it is paid.

Expenses you can deduct

You can deduct expenses that relate to earning the rental income. The common ones are:

• Mortgage interest. From 1 April 2025, 100% of interest on money borrowed for a residential rental is deductible again. The phased restrictions that applied between 2021 and 2025 are over. Only interest is deductible, never principal repayments.
• Rates and insurance. Council rates, regional council rates, landlord insurance and body corporate levies (operating levies, not long-term maintenance fund contributions for capital work).
• Repairs and maintenance. Fixing something back to its previous condition is deductible. Improving it is capital and is not — it is either depreciated (chattels) or simply added to your cost base (building work). Replacing a broken hot-water cylinder with an equivalent one is a repair; adding a heat pump where there was none is an improvement.
• Property management fees, letting fees, advertising for tenants and tenancy tribunal filing fees.
• Accounting and legal fees for the rental activity, including the cost of preparing the return.
• Depreciation on chattels. Stoves, heat pumps, carpets, curtains, dishwashers and similar can be depreciated at Inland Revenue's published rates. Buildings themselves have a 0% depreciation rate for residential property.
• Healthy Homes compliance costs are a mixed bag: a compliance assessment is deductible, ground moisture barrier and draught stopping are generally repairs, while installing a new fixed heater or new insulation where there was none is usually capital.
• Travel to inspect the property or meet tradespeople, at the Inland Revenue mileage rate, if you keep a log.

Expenses you cannot deduct

The cost of buying the property, legal fees on purchase, the principal part of loan repayments, your own labour, and any expense that relates to private use. If you or family stay in the property, or it is unavailable for rent for part of the year for personal reasons, you apportion.

Ring-fencing: the rule that surprises new landlords

If your rental expenses exceed your rental income, the loss is ring-fenced. You cannot offset it against your salary or business income to get a refund. The loss carries forward and can only be used against future residential rental income, or released if the property is later sold in a taxable sale. In practice this means a negatively geared property gives you no tax benefit in the year of the loss — plan your cashflow on that basis.

Bright-line and selling

For properties sold on or after 1 July 2024 the bright-line period is two years. If you sell within two years of acquiring the property (measured from the date title transferred to you to the date you sign the sale agreement), any gain is taxable income, unless the main-home exclusion applies. Beyond two years, bright-line no longer applies, though the general intention rules still can if you bought with the purpose of resale.

GST does not apply

Residential rent is exempt from GST. You cannot register the rental activity for GST, cannot claim GST on expenses, and do not charge GST on rent. Short-term accommodation (holiday lets) is different and can be a taxable activity.

The record-keeping system that makes this easy

Inland Revenue requires you to keep records for seven years. Beyond that legal minimum, a simple structure removes most of the pain:

1. A dedicated bank account for the rental, so every transaction is either rent in or an expense out.
2. A monthly ledger with one row per transaction, categorised to the IR3R expense headings from the start so the year-end totals are a sum, not a sort.
3. A folder (physical or cloud) for invoices, named by date and supplier.
4. A loan interest summary from your bank each April.
5. A chattels register listing each item, its cost, purchase date and depreciation rate.

Our NZ Landlord Compliance Kit and NZ Landlord Pack are built around exactly this structure, with the expense categories already matching the IR3R. If you would rather build your own, the categories above are the ones to use.

Quick estimate

To see roughly what tax a rental profit will attract at your marginal rate, try the free rental income tax calculator. It is an estimate for planning, not a return.

This article is general information for the 2025–26 tax year and is not tax advice. Rules change; confirm your position with Inland Revenue (ird.govt.nz) or a chartered accountant.