What Expenses Can I Claim on a Rental Property in NZ?

The Big Picture: How IRD Treats Rental Expenses

The IRD allows rental property owners to deduct expenses that are incurred in the process of earning rental income. The rule is straightforward: if the expense is directly connected to generating rent, it is generally deductible. Capital expenses — things that improve or add to the property — are not immediately deductible and must be depreciated or capitalised instead.

Mortgage Interest: The Biggest Deduction

For most investors, mortgage interest is the single largest deductible expense — often $25,000–$50,000 per year on a typical NZ investment property. Its history has been turbulent. Here is where things stand in 2026 and how we got here.

What You Can Claim: Full Expense Checklist

These are the standard running costs the IRD allows landlords to deduct. They must be incurred while the property is available to rent — expenses for periods when the property is not on the rental market are not deductible. Keep receipts for everything.

• Mortgage interest. 100% deductible from 1 April 2025. Applies to interest on money borrowed to buy, build, or improve the rental property. Principal repayments are NOT deductible.
• Rates and ground rent. Council rates paid on the rental property are fully deductible for the periods the property is available for rent.
• Insurance premiums. Building insurance, landlord insurance, and contents insurance (if you supply furnished fittings) are all deductible. Life insurance and income protection on yourself are not.
• Property management fees. If you use a property manager (typically 7–10% of rent), their fees and any letting fees they charge are fully deductible.
• Repairs and maintenance. Restoring the property to its original condition is deductible. This includes fixing leaks, painting, replacing broken windows, servicing appliances, and routine upkeep. Work that extends the property’s life or adds value is capital — see section 4.
• Advertising and tenant finding costs. Trade Me listings, signage, and any cost to find and screen tenants are deductible in the year they occur.
• Accounting and legal fees. Fees paid to your accountant for preparing the rental income schedules and your tax return are deductible. Legal fees for drawing up or renewing tenancy agreements are deductible; legal fees for purchasing or selling the property are capital costs and are not deductible.
• Body corporate levies. If you own an apartment or unit in a body corporate, the levies charged to you are deductible. Sinking fund contributions (to a body corporate capital fund) are not immediately deductible but may be claimable when the work is completed.
• Utilities and services (if you pay them). If your tenancy agreement includes internet, water, or other utilities that you pay as the landlord, these are deductible.
• Travel costs. You can claim travel to inspect or maintain the property if the primary purpose of the trip is property-related. Visiting the rental on the way to or from a personal trip does not make the full journey deductible. Keep a logbook. The IRD scrutinises this area heavily.
• Bank fees and loan establishment costs. Annual account fees, break fees on fixed mortgages, and the amortised portion of loan establishment costs can be deductible. Lump-sum mortgage break fees are generally deductible in the year incurred.
• Depreciation on chattels. Items separate from the building structure (carpet, curtains, heat pumps, appliances, light fittings) can be depreciated annually at IRD-set rates. See section 5 for rates and common examples.

Repairs vs Capital Improvements — The Critical Distinction

This is the area where landlords most commonly get their tax return wrong. The IRD applies a three-part test: is the work a repair (restores to original condition), an improvement (enhances beyond original), or a replacement (new asset)? The distinction determines whether you can claim it immediately or must depreciate over time.

Depreciating Chattels: What You Can Claim Each Year

While the residential building itself cannot be depreciated (0% building depreciation applies in NZ), the chattels — items that are separate from the building structure — can be depreciated each year at rates set by the IRD. This creates annual tax deductions without any cash outlay.

Items costing $1,000 or less can be immediately expensed in the year purchased under the low-value asset threshold, rather than depreciated over time. This is useful for smaller appliance replacements.

Holiday Homes and Mixed-Use Properties

If your property is used for a mix of income-earning rental, private use, and periods when it is empty (available but unlet), a special apportionment formula applies. You cannot claim 100% of expenses — only the income-earning proportion. This applies most commonly to holiday homes and bach rentals.

Full Worked Example: Net Taxable Rental Income

This example shows how expenses reduce taxable rental income for a typical Auckland investment property. The investor earns a salary and pays income tax at 33% on the top dollar of their rental income.

In this example, the investor’s deductible expenses exceed their rental income, creating a net rental loss. That loss is deductible against their salary income, reducing their overall tax bill by $7,215. This “negative gearing” effect is common in Auckland where yields are lower but expenses — particularly interest — are high relative to rent.

What You CANNOT Claim

Understanding what is not deductible is just as important as knowing what is. Claiming non-deductible expenses is the most common source of audit adjustments for landlords.

• Principal mortgage repayments. The repayment of loan principal is never deductible. Only the interest component qualifies.
• Capital improvements to the building. Renovations, additions, and structural upgrades must be capitalised. The residential building itself cannot be depreciated, so you get no ongoing deduction for building improvements.
• Purchase price and conveyancing costs. The cost of buying the property, stamp duty equivalent (not applicable in NZ but equivalent closing costs), and legal fees for the purchase are capital costs and are not deductible.
• Private use portion of mixed-use property. If you use the property yourself, the expenses attributable to those days are not deductible. The mixed-use apportionment formula applies.
• Expenses while not available for rent. If the property sits empty because you are not actively trying to rent it (long-term vacant, under major renovation, or being held for sale), expenses during that period are not deductible.
• Your own labour. The value of time you spend on the property yourself — mowing lawns, painting, fixing things — cannot be claimed as a deduction. Only actual cash costs paid to third parties are deductible.
• Fines and penalties. Any fines paid to councils, the Tenancy Tribunal, or other authorities are not deductible. Neither are penalties or shortfall penalties imposed by the IRD.
• Building depreciation. Residential buildings have a 0% depreciation rate in NZ. You cannot claim annual depreciation on the building structure, even though the building is an asset that will eventually need work or replacement.
• Personal insurance and life insurance. Insuring yourself (income protection, life insurance) does not relate to earning rental income and is not deductible as a rental expense. Landlord insurance on the property itself is deductible.