Rental Property Expenses You Can Claim at Tax Time

Many costs incurred in earning rental income may be deductible, provided they satisfy Inland Revenue's deductibility rules and are not capital or private expenditure. A cost that adds to the property rather than earns income from it is capital, and capital costs are not deductible. That is the test behind almost every line on a landlord's return.

The figure that matters most this year is interest. From 1 April 2025, 100 percent of the interest on a residential rental property loan is deductible again, no matter when the property was bought or the loan was drawn down, provided the usual deductibility requirements are met and the borrowing relates to the rental. Not every loan or interest payment qualifies automatically. For the year to 31 March 2025, only 80 percent applied.

Crockers has managed Auckland rental properties since 1971. This guide sets out what you can and cannot claim, where the line sits between a repair and an improvement, and what happens if your expenses run ahead of your rent. For the filing steps and IR3 mechanics, see our rental property tax and filing guide.

Quick Answers

Can I claim all of my mortgage interest?

Generally yes, from 1 April 2025. Principal repayments are never deductible.

What is the difference between a repair and an improvement?

As a rule of thumb, a repair restores the property to the condition it was already in, and an improvement takes it beyond that. Repairs are deductible in the year they happen, improvements are capital. Substantial or mixed jobs can need a closer look, see the section below.

Can I claim property management fees?

Yes. Management fees, letting fees and tenant advertising are fully deductible as costs of earning rental income.

What if my expenses are more than my rental income?

The loss is ring-fenced. It cannot reduce tax on your salary or other income, but it carries forward against future rental income.

Do I need to keep receipts?

Yes, for 7 years. Inland Revenue can ask for them at any time during that period.

What makes a cost claimable

The underlying test is simple: the cost has to relate to earning rental income. If it relates instead to buying the property, improving it, or your own private use of it, it is not deductible.

Long-term residential rent is exempt from GST, so GST on expenses relating to that rental cannot be claimed back separately, and you generally record and claim these costs GST-inclusive.

A cost belongs to the income year it was incurred in, not the year you paid the invoice. Where a property is used privately for part of the year, costs must be apportioned, covered below.

Rental expenses you can claim

The table below covers common rental property expenses. The three most misunderstood lines are covered in more detail underneath.

Mortgage interest

Interest is 100 percent deductible from 1 April 2025, up from 80 percent for the year to 31 March 2025, regardless of when the property was bought or the loan was taken out. Only the interest portion of a mortgage payment is deductible, principal repayments are never deductible.

Property management and letting fees

Management fees, letting fees and tenant advertising are deductible costs of earning rental income. If Crockers manages the property, these are already itemised for you on your annual statement rather than something you need to reconstruct at filing time. See property management in Auckland for how that service works.

Depreciation on chattels

Chattels such as carpets, curtains, refrigerators, washing machines and many single-split heat pumps can be depreciated. Items that Inland Revenue treats as part of the building itself, including standard light fittings, insulation and ducted or multi-unit heat pump systems, sit within the building's 0 percent depreciation rate rather than as separate chattels. Land is never depreciable. A chattels valuation done at purchase makes this straightforward, since it splits the purchase price into depreciable items with a supportable value for each.

Repairs or improvements, and why the difference matters

A repair restores the property to the state it was already in. An improvement takes it beyond that state, whether that means added capacity or a feature the property did not have before. Repairs are claimed in the year they are incurred. Improvements are capital and are not deductible, though the new item may itself be depreciable as a chattel.

This is a practical guide, not a definitive test. Inland Revenue looks at the specific asset involved and the nature and extent of the work, and better materials alone do not automatically make a job capital. Substantial replacements or jobs that mix repair and improvement work are where it pays to check with your tax adviser.

Worked examples

• Replacing three rotten fence palings is a repair. Replacing the whole fence with a taller one is an improvement.

• Repainting an existing painted wall is a repair. Recladding the house is an improvement.

• Patching a small damaged section of carpet is a repair. Replacing the carpet throughout the property is normally treated as acquiring a new depreciable chattel rather than a same-year repair, see Depreciation on chattels above.

• Fixing a leaking tap is a repair. A full bathroom renovation is an improvement.

Healthy homes work

Compliance repairs to something the property already had, such as fixing an existing extractor fan, are generally deductible. Installing new insulation where none existed before is treated differently: Inland Revenue views this as capital expenditure that changes the character of the building, added to the building's cost rather than depreciated separately, and the building itself has a 0 percent depreciation rate. Heat pumps depend on the type of system. A single-split unit can often be depreciated separately as a chattel. A ducted or multi-unit system is more likely to be treated as part of the building, in the same way as insulation. See the healthy homes standards for the current compliance requirements.

Expenses you cannot claim

• The purchase price of the property

• Principal repayments on the mortgage

• Depreciation on the land and the building

• Real estate agent commission on buying or selling

• Additions and improvements

• Legal fees on sale

• The value of your own time and labour on repairs

• The private use portion of any cost

One exception worth knowing: legal fees on buying a rental property are deductible where your total legal fees for the income year are $10,000 or less. Legal fees on selling are narrower: they are only deductible if you are in the business of providing residential rental accommodation, and even then only where your total legal fees for the income year are $10,000 or less. Most landlords with one or two rentals are not in that business, so sale legal fees are usually not deductible for them.

Splitting costs the property did not earn all year

A gap between tenancies does not usually stop a claim, provided the property is genuinely available to rent. Costs must be apportioned where the property was your home for part of the year, where you rent out part of your own home, or where family use it privately, split space based costs by floor area and time based costs by days.

Body corporate levies

Split the levy based on what the money is actually spent on, not simply which fund it sits in. The portion spent on operating and maintenance costs is deductible. The portion spent on capital improvements is not, even where it is paid through a long term maintenance fund, since that fund can hold both revenue and capital spending. Your body corporate statement, or the committee, can usually help identify the split. If your rental is in a unit title development, our apartment property management team can talk you through how levies, maintenance planning and your annual statement fit together.

When your expenses are more than your rent

Residential rental losses are ring-fenced. A loss cannot offset your salary, wages or other income. Instead, it carries forward against future residential rental income. See our rental property tax and filing guide for how ring-fenced losses are worked through on your return.

Records to keep

Keep records for 7 years. Inland Revenue can ask for supporting evidence for any deduction during that period, so it pays to keep things organised as you go rather than reconstructing them at filing time.

What to keep: rates and water invoices, insurance schedules, loan interest statements, repair invoices and quotes, management statements, tenancy agreements, and your chattels valuation.

A Crockers annual statement consolidates most of this in one place, rent, fees, rates and maintenance for the year.

Getting the expenses right

Most of the questions in this guide come up because a landlord is reconstructing a year of costs from memory at filing time. Crockers records rent, fees, rates and maintenance costs across the year, so your annual statement already reflects much of what a tax agent needs rather than something you build from scratch in June.

Crockers also runs offers for new property management clients from time to time, including support with first year tax filing. See our rental property tax and filing guide for what is currently available.

This information is general in nature and is not tax advice. Rules change and individual circumstances differ. Talk to a chartered accountant or tax agent about your situation.

If you would like a clearer picture of what your rental could be earning, and what Crockers would itemise on your behalf, request a free rental appraisal and we will talk you through it.

Article written by Shanon Aitken, Crockers Property Management

This article was prepared by the Crockers Property Management team in Auckland, drawing on our experience managing residential rentals since 1971. Reviewed against Inland Revenue guidance, September 2026.