Interest deductibility
Interest deductibility is the ability to claim mortgage interest on a rental property as a tax-deductible expense. Full 100% deductibility was restored for NZ residential investors from 1 April 2025.
Between 2021 and 2024 deductibility was progressively removed for existing residential rentals, then phased back in — 80% in the 2024–25 tax year and 100% from 1 April 2025. New builds retained deductibility throughout.
Deductible interest reduces your taxable rental income, which materially changes the cashflow maths on a leveraged rental. Model it both ways when policy is in flux — this rule has proven politically volatile.
Source: IRD — interest limitation rules
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