Calculate how much income tax you'll pay on your New Zealand rental property earnings — includes deductible expenses and marginal rate breakdown for 2025-26.
In New Zealand, rental income is taxed as ordinary income at your marginal rate — it stacks on top of your salary, wages, or business income. The Inland Revenue (IRD) 2025-26 tax rates are: 10.5% on income up to $14,000; 17.5% from $14,001–$48,000; 30% from $48,001–$70,000; 33% from $70,001–$180,000; and 39% above $180,000. Rental losses can often be ring-fenced under the residential rental property loss rules unless you meet specific criteria.
The key change for 2025 landlords: interest deductibility is fully restored from 1 April 2025. This means 100% of mortgage interest on residential rental properties can again be deducted against rental income — a significant improvement for cash-flow and tax liability compared to 2023-24 when only 50% was deductible.
The IRD allows the following deductions against rental income for residential properties:
Note: capital improvements (new additions, extensions) are NOT deductible as repairs. Depreciation on buildings was removed and has not been restored for residential properties.
Since 1 April 2019, residential rental losses are ring-fenced — they can only be offset against other residential rental income, not against salary or other income. Losses carry forward to future rental years. Exceptions apply for properties subject to the mixed-use asset rules and certain overseas properties. New builds that meet the criteria may also have different treatment under transitional rules. If your property runs at a loss, factor in that the tax saving only applies against future rental profits — consult an accountant for ring-fencing implications specific to your portfolio.
This calculator covers annual rental income tax only. If you sell a property within the Bright-Line period (2 years for properties acquired from 1 July 2024; 10 years for properties acquired between 27 March 2021 and 1 July 2024), capital gains may also be taxable. Use the NZ Bright-Line Tax Calculator to estimate tax on disposal. The total tax picture includes both ongoing rental income tax AND potential Bright-Line tax on sale.
Take a landlord earning $75,000 salary plus $28,600 annual rent. Their deductible expenses are $24,000 mortgage interest (100% deductible from 1 April 2025), $3,000 council rates, $1,800 landlord insurance, and $2,200 property management — total deductions of $31,000. Because deductions exceed rent, the property runs a $2,400 net loss. Under ring-fencing rules, this loss does not reduce the $75,000 salary tax; instead it carries forward against next year's rental profit. Now change interest deductibility to the 2023-24 setting of 50%: deductible interest drops to $12,000, total deductions fall to $19,000, and the property instead shows a $9,600 profit taxed at the 33% marginal rate — about $3,168 extra tax. The same property swings from a tax loss to a $3,168 bill purely from the interest-deductibility change. This is why the restoration of 100% interest deductibility from 1 April 2025 is the single biggest factor in 2025-26 rental tax.
Three errors cost landlords the most at IR3 time. First, claiming capital improvements as repairs — replacing a roof or adding a deck is a capital cost, not a deductible repair; only restoration of existing condition qualifies. Second, expecting a rental loss to cut salary tax — ring-fencing has blocked that since April 2019, and the loss only helps future rental years. Third, using the wrong interest-deductibility percentage for the year — 50% applied in 2023-24, 80% in 2024-25, and 100% from 1 April 2025; mixing these up either overstates deductions (penalty risk) or overpays tax. Also remember the IRD receives data directly from property managers, so undeclared rent is easily cross-checked. When in doubt, confirm rates and rules at ird.govt.nz before filing. Last updated: May 2026.