Can I claim expenses if my property is vacant?

Generally yes, if the property is available for rent and you are actively trying to find tenants. Ongoing holding costs like rates, insurance, and mortgage interest remain deductible during genuine vacancy periods. Extended vacancies may attract IRD scrutiny.

Do I need to keep paper receipts?

Digital records are acceptable. Scanned receipts, PDF invoices, and bank statements can all serve as evidence. The key is that records are legible, show the relevant details, and are stored securely for at least seven years.

Can I claim the cost of tools I buy for property maintenance?

If you buy tools specifically for property maintenance, they may be deductible. Low-cost items (under $1,000) can typically be expensed immediately. More expensive items may need to be depreciated. If tools are also used personally, only the rental use portion is deductible.

What if I pay a family member to help with the property?

Payments to family members can be deductible if they are for genuine services at a reasonable market rate. Keep records of what work was done, when, and why the amount paid is reasonable. Informal arrangements may be challenged by IRD.

What Expenses Can Landlords Claim NZ

Understanding what expenses you can claim is essential for optimising your tax position as a landlord. Many investors either miss legitimate deductions or claim things they should not, both of which can be costly. This guide covers the main categories of deductible expenses and common pitfalls to avoid.

The basic rule is simple: expenses are deductible if they are incurred in earning your rental income. However, applying this rule to specific situations requires understanding the nuances. Let us work through the main categories.

Mortgage Interest

Interest on your rental property mortgage is typically one of the largest deductions for landlords.

Interest Deductibility Restored:

From 1 April 2025, 100% of mortgage interest is deductible for all residential investment properties. The previous restrictions and phase-out rules no longer apply.

Interest is deductible on borrowings used to acquire or improve the rental property. If you have refinanced or used your property as security for other borrowings, only the portion relating to the rental property is deductible.

Rates and Insurance

Council rates and property insurance premiums are fully deductible for rental properties. This includes contents insurance if you provide furnishings, and landlord-specific insurance products.

If the property is used partly for private purposes (such as a holiday home you also rent out), you need to apportion these costs based on the rental versus private use.

Repairs and Maintenance

Costs to repair and maintain your rental property are deductible in the year incurred. This includes painting, fixing leaks, replacing worn carpets with similar quality, and general upkeep.

Common Deductible Repairs:

Plumbing repairs
Electrical repairs
Repainting (same colour/quality)
Replacing worn carpet with similar
Fixing broken appliances
Garden maintenance
Gutter cleaning
Pest control

Be careful to distinguish repairs from improvements. Repairs restore something to its original condition, while improvements enhance or upgrade. Improvements are capital expenditure, not immediately deductible.

Property Management Fees

Fees paid to property managers are fully deductible. This includes ongoing management fees (usually a percentage of rent), letting fees for finding new tenants, and any other services provided by your property manager.

If you manage the property yourself, you cannot claim a notional management fee for your time. Only actual expenses paid to third parties are deductible.

Professional Fees

Fees for professional services related to your rental property are deductible. This includes accountant fees for preparing your rental accounts and tax return, legal fees for tenancy matters, and fees for property valuations related to ongoing management.

Deductible Professional Fees:

Accountant fees for rental income/expense work
Legal fees for tenancy disputes or agreements
Property inspection fees
Quantity surveyor fees for depreciation schedules

Note that legal fees for purchasing or selling a property are capital costs, not deductible expenses. The cost of a depreciation schedule is deductible as it relates to ongoing tax compliance.

Travel Expenses

Travel costs to manage your rental property are deductible, but this is an area IRD scrutinises closely. You can claim travel to inspect properties, meet tenants, conduct viewings, or pick up supplies for the property.

Vehicle Expense Options:

Actual costs: Keep a logbook and claim the business use percentage of actual costs
Kilometre rate: Claim the IRD mileage rate for business kilometres travelled

If you travel to a distant location to inspect property and combine this with a holiday, only the property-related portion is deductible. Be conservative and keep detailed records of the purpose of each trip.

Advertising and Tenant Finding

Costs to advertise your property for rent and find tenants are deductible. This includes Trade Me listings, newspaper advertisements, signage, and tenant screening fees.

Body Corporate Fees

If your rental property is in a body corporate (such as an apartment), the regular body corporate levies are deductible. However, special levies for capital improvements may need to be treated as capital expenditure, depending on what the levy is for.

Depreciation

While you cannot depreciate the building itself for residential rental properties, you can claim depreciation on chattels and fit-out items. Common depreciable items include:

Depreciable Items:

Appliances (oven, dishwasher, washing machine)
Carpets and drapes
Furniture (if furnished)
Hot water cylinders
Heat pumps
Alarm systems

A quantity surveyor can prepare a depreciation schedule that identifies all depreciable items and their values. This often uncovers deductions investors would otherwise miss.

Home Office Expenses

If you manage your rental properties from a home office, you may be able to claim a portion of your home expenses. This includes a share of electricity, internet, and potentially rates and insurance, based on the floor area used and time spent on property management.

Keep records of time spent on property management activities to support any home office claim. For most landlords with one or two properties, this deduction is modest.

What You Cannot Claim

Understanding what is not deductible is just as important as knowing what is.

Non-Deductible Expenses:

Purchase price of the property (capital)
Capital improvements and renovations (capital)
Expenses for private use portions
Your own labour or time
Fines and penalties
Legal fees for property purchase/sale
Costs to repair initial defects at purchase

Record Keeping

You need documentation to support every deduction you claim. Keep receipts, invoices, and bank statements that show what was paid, when, and for what purpose. Without adequate records, IRD can disallow claimed deductions.

The Bottom Line

Claiming all legitimate expenses is essential for managing your tax position, but accuracy is equally important. Claiming deductions you are not entitled to can result in penalties and interest if IRD audits you.

Work with a qualified accountant, keep thorough records, and review your expense claims annually to ensure you are optimising your position within the rules.