For most landlords, mortgage interest is the single biggest cost of owning a rental. Being able to deduct that interest as an expense against rental income directly affects your tax bill and your property’s cashflow.
After several years of reduced or phased-out deductions, full interest deductibility was restored from 1 April 2025. This is a major shift for investors, reducing effective holding costs and improving long-term returns.
As of the 2025/26 tax year, investors can claim 100% of mortgage interest costs on residential rental properties.
Here’s how we got here:
For many landlords, this marks the end of several years of extra tax pressure. For investors considering a purchase, these tax changes can improve the long-term affordability of a rental property investment.
Let’s put this into a scenario:
Suppose you have a $600,000 mortgage on a rental property at an average rate of 6.5%. That’s about $39,000 in annual interest.
If you’re on a 33% tax rate, that’s almost $20,000 in extra tax savings each year compared with the restrictions two years ago.
Some property types were always exempt from the restrictions, and remain so today”
For everyday landlords, however, the big news is that deductibility is now fully back across standard rental properties.
Full deductibility lowers your effective holding costs, leaving more rental income in your pocket. This is especially valuable at today’s interest rates.
Some investors sold properties during the phase-out because tax bills became unmanageable. With full deductibility back, holding on for the long term is much more viable.
If you’re buying now, you’re entering the market under the most favourable deductibility settings in years. That makes forward planning and cashflow forecasting more predictable. Investors planning a purchase should also consider how much upfront capital lenders typically expect for a rental property, since size of deposit plays a major role in loan approval and long-term investment strategy.
Scenario |
Tax Calculation |
Tax Payable |
Cashflow Outcome |
|---|---|---|---|
Without Deductibility |
Rental income: $40,000 Less expenses (excluding interest): $5,000 Taxable profit = $35,000 |
$11,550 (33%) | Negative – $6,550 out of pocket after tax |
With Full Deductibility |
Rental income: $40,000 Less mortgage interest: $30,000 Less other expenses: $5,000 Taxable profit = $5,000 |
$1,650 (33%) | Positive – matches true $5,000 profit |
As of April 2025, interest deductibility is fully back for property investors in New Zealand. For landlords, this means stronger cashflow, better after-tax returns, and more confidence to hold or expand their portfolios.
Interest deductibility is a welcome change for New Zealand Property investors. It means your rental property is now assessed on its true profit, giving you a stronger cashflow, lower tax bills and greater confidence to plan ahead.
But every investor’s situation is different. The way deductibility interacts with your income, loan structure and future goals can have a big impact on your bottom line.
If you’d like to understand exactly how these changes affect you, get in touch with the team at Platinum Mortgages. We’ll crunch the numbers, compare lender options, and help you structure your lending for the best long-term outcome.
Angela is an accredited Financial Adviser, licensed under FSP742251 and has been in the Financial Industry since 2006. Our 5-star Google reviews reflect the excellent customer experience we promise — making your home loan journey positive, stress-free, and rewarding. At Platinum Mortgages, our clients are the reason we exist — so you can be confident every step is guided by genuine care and expertise.
