What are my tax obligations for rental income in New Zealand?

If you earn rental income from residential property in New Zealand, you must declare it to IRD and pay income tax on your net rental profit (rental income minus allowable expenses).

Key obligations:

• You must file an IR3 individual tax return each year declaring your rental income and expenses
• Rental income is taxed at your marginal income tax rate (10.5% to 39%), added on top of your other income
• You must keep records of all rental income received and expenses claimed for at least 7 years

Calculating your taxable rental income:

Gross rental income includes rent, bond money retained, and any other payments from tenants. From this you subtract your allowable expenses to arrive at your taxable rental profit.

Common deductible expenses:

• Mortgage interest (100% deductible from 1 April 2025)
• Insurance premiums
• Council rates and water rates
• Property management fees
• Repairs and maintenance
• Depreciation on chattels (appliances, carpets, curtains)
• Advertising for tenants
• Accounting fees for rental property tax preparation

If you make a rental loss:

Rental losses can generally be carried forward to offset future rental income, but specific rules may limit how losses interact with your other income. Consult a tax professional if you consistently make rental losses.

Important: You cannot claim deductions for capital improvements (renovations that increase the property's value), the purchase price of the property, or private expenses. Residential buildings themselves are not depreciable, though chattels within the property can be depreciated.