If you’re a property investor, you’ve likely heard the news: interest deductibility is back. As of 1 April 2025, landlords can once again claim 100% of interest expenses on loans used for rental properties—reinstating a key tax advantage that was previously phased out.
This change means investors can reduce their taxable rental income by deducting the interest portion of mortgage repayments and other qualifying loans, significantly improving cash flow. It’s a welcome shift, but the rules can still be confusing, so here’s an easy guide for New Zealand property investors on what you can and can’t claim in your next tax return.
Why Was Interest Deductibility Removed?
The previous government phased out interest deductibility from 2021, aiming to cool the housing market and reduce investor demand. However, property investors heavily criticised this policy, arguing it increased holding costs and discouraged long-term rental ownership. The new government has reversed this stance, restoring full deductibility from April 2025.
What You Can Claim
Landlords can now deduct the full interest cost on:
- Loans used to purchase residential rental properties
- Loans for renovations, maintenance, or upgrades (e.g. replacing a roof, adding insulation, or installing heating)
- Refinanced mortgages for rental properties
This applies whether the loan was taken recently or several years ago, as long as it relates directly to rental activity.
What You Can’t Claim
There are still some exclusions:
- Principal repayments – only the interest portion is deductible
- Loans used for personal expenses, even if the loan is secured against a rental property
- Interest on loans for other investments, like shares or unrelated businesses
What About Mixed-Use or New Builds?
Different rules may apply if your property is mixed-use (e.g., part residential, part business) or a new build. These situations can affect how much of your interest you can deduct, so it’s worth getting professional advice.
You can read more about the latest guidance on the Inland Revenue website.
Talk to the Experts
Even with the return of interest deductibility, it pays to keep solid records and understand how these changes apply to your specific property or portfolio. Every situation is different.
Not sure where you stand? Let our Angels help.
Our experienced team at Angel Property Managers can help you navigate your obligations and ensure you’re claiming everything you’re entitled to.
Contact us today and make sure your property is working for you, not the other way around.