Understanding Interest Deductibility for Property

One of the biggest tax shifts for property investors in New Zealand over recent years has been the removal — and potential reinstatement — of interest deductibility.

Here’s what you need to know in 2025.

🧾 What Is Interest Deductibility?

Interest deductibility means investors can claim the mortgage interest they pay on investment properties as a tax-deductible expense. Until recently, this was standard. But under the Labour Government’s 2021 changes, deductibility was phased out for existing properties.

🏛️ Where Are We Now in 2025?

With a change in government, the National Party began restoring interest deductibility from April 2024. The staged reinstatement looks like this:

• 2024–2025 tax year: 60% of interest is deductible

• 2025–2026 tax year: 80%

• 2026–2027 onwards: 100% deductible again

This only applies to existing properties. New builds remain fully deductible.

🔍 What Does This Mean for Investors?

Restored deductibility improves cash flow and makes property investment more financially viable again — especially in regions with higher mortgage servicing costs like Auckland and Wellington. It could also trigger an uptick in investor interest throughout 2025.

Be sure to talk to your accountant or property tax advisor to understand how these rules apply to your structure — especially if you’re investing through a trust or company. IRD’s official guidance is the best place to stay up to date.