From 1 April 2025, interest on loans for residential investment property is once again 100% deductible — regardless of when you bought the property or when you drew down the loan. Between 1 October 2021 and 31 March 2025, different rules applied depending on those dates. Those rules still matter if you're amending or filing a return that covers an earlier year.

What this article covers

This article explains interest deductibility rules for residential rental properties owned by individuals or partnerships, covering the transitional phases from 2021 to the current full restoration.

This article does not cover:

• Properties held in trusts, look-through companies (LTCs) or other structured entities
• Mixed-use properties like holiday homes or boarding house arrangements
• Non-resident owners subject to different tax rules
• Commercial properties or bare land investments

Current rules: 100% deductibility restored

From 1 April 2025, you can claim 100% of the interest on loans for residential investment property, regardless of the purchase or loan drawdown date. This follows the repeal of the interest-limitation rules (previously in Subpart DH of the Income Tax Act 2007) by the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024.

Interest still has to meet the ordinary deductibility tests — it must relate to earning rental income and can't be for private use. The residential loss ring-fencing rules also still apply, so a rental loss can only be used against other residential rental income (or carried forward), not offset against salary or other income.

The transitional timeline: What applied when

Tax Year	Pre-27 March 2021 Properties	Post-27 March 2021 Properties	New Builds
2025/26+	100% deductible	100% deductible	100% deductible
2024/25	80% deductible	80% deductible	100% deductible
2023/24	50% deductible	0% deductible	100% deductible
2022/23	75% deductible	0% deductible	100% deductible
2021/22	100% until 30 Sept 2021, then 75%	100% until 30 Sept 2021, then 0%	100% deductible

Why 27 March 2021 matters

This date marks when the government announced the interest deductibility restrictions. Properties purchased before this date got transitional phase-out rules. Properties purchased after faced immediate restrictions (though these have now been reversed).

New build exemptions

Properties classified as new builds kept full interest deductibility throughout the restriction period. A new build, for this purpose, is a self-contained residence that received its Code Compliance Certificate on or after 27 March 2020. The exemption applied for up to 20 years from the date of that CCC and passed on to subsequent owners within that period. See IRD's residential property interest limitation rules for the full new-build criteria.

Worked examples for 2025/26

Example 1: Pre-2021 purchase, standard property

Property details:

• Purchase date: January 2020
• Mortgage: $600,000 at 5.5% interest
• Annual interest: $33,000

Working out the rental result:

• Rental income: $31,200 ($600/week)
• Other expenses: $10,000 (rates, insurance, maintenance)
• Interest claim: $33,000 (100% deductible from 1 April 2025)
• Deductions total: $43,000 vs rental income of $31,200
• Ring-fenced: deductions capped at $31,200 this year; $11,800 carried forward to future rental income or gains on sale

Under the residential-loss ring-fencing rules, a rental loss can't offset your salary or other income — it's carried forward to future years and used against later rental income or gains on sale.

Example 2: Post-2021 purchase

Property details:

• Purchase date: June 2022
• Mortgage: $900,000 at 6% interest
• Annual interest: $54,000

Working out the rental result:

• Rental income: $39,000 ($750/week)
• Other expenses: $15,000
• Interest claim: $54,000 (100% deductible from 1 April 2025)
• Deductions total: $69,000 vs rental income of $39,000
• Ring-fenced: deductions capped at $39,000 this year; $30,000 carried forward

Common mistakes to avoid

Applying outdated rules

Some landlords still assume post-2021 purchases can't claim interest. From 1 April 2025, that's no longer the case — a $500,000 mortgage at 6% is around $30,000 of interest that can now reduce your rental taxable income (subject to the ring-fencing cap).

Using the wrong rate for an earlier year

The 100% figure only applies from the 2025/26 tax year onwards. If you're filing or amending a return for 2024/25, the correct figure is 80%. For 2021/22 through 2023/24, the rate depends on whether the loan was drawn down before or on/after 27 March 2021. Overclaiming triggers IRD reassessment, shortfall tax, and use-of-money interest.

Misclassifying new builds

Not all recent construction qualifies as a new build for these rules. The key test is a Code Compliance Certificate issued on or after 27 March 2020 for a self-contained residence. If the CCC is earlier than that, the normal (non-exempt) rules applied during the restriction period.

Loan drawdown dates vs purchase dates

For properties bought before 27 March 2021, the loan drawdown date can affect which rules applied during the restriction period. If you refinanced or drew down additional funds after 27 March 2021, those portions followed the post-2021 timeline.

That complexity no longer affects new claims — from 1 April 2025 onwards, all residential investment property interest is 100% deductible regardless of purchase or drawdown dates. It still matters for amended or late-filed returns covering earlier years.

Filing returns for transitional years

If you need to file returns for tax years 2021/22 to 2024/25, you'll need to apply the correct transitional percentages. IRD's residential property interest limitation page has the tools and guidance for working out what applied to your situation.

Key factors:

• Property purchase date
• Loan drawdown date (if different)
• New build status
• Your income tax bracket

This information is general in nature and not intended as financial or tax advice. Tax rules change; the details above were verified against Inland Revenue guidance on 22 April 2026. Consult a qualified accountant or tax advisor for advice specific to your situation.