From 1 April 2025, qualifying interest on New Zealand residential rental borrowing became 100% deductible again under the restored rules. The relevant phase-in had already finished by the 2025–26 income year: 50% in 2023–24, 80% in 2024–25 and 100% from 2025–26. The phase-in was complete from 1 April 2025. Inland Revenue's property-interest page states the dates and reminds owners that ordinary deductibility and private-use rules still apply.
An interest deduction is not a tax rebate
Tama pays NZ$30,000 mortgage interest for a qualifying rental in 2025–26. He may generally deduct the full NZ$30,000 of qualifying interest from rental income or a permitted rental-loss calculation, rather than receiving NZ$30,000 cash. A 33% marginal-rate multiplication would give an illustrative NZ$9,900 reduction only if the whole deduction actually offsets taxable income at that rate in that period. Rental-loss ring-fencing, other expenses, personal use and the tax bracket can change the realized timing and value.
What the phase-in math shows
For the same NZ$30,000 qualifying interest amount, the old phase limits would have allowed NZ$15,000 at 50% and NZ$24,000 at 80%; the restored 100% figure is NZ$30,000. This is a reproducible comparison of deductible interest, not a final tax bill at a flat rate.
Use of funds matters
Loan security alone does not decide deductibility. If a rental property secures a loan for private spending, that interest is not deductible merely because the property is the collateral. Record each borrowing's use and private/rental apportionment. IRD's rental-expense guide explains non-deductible capital, principal and private-purpose costs. The bright-line sale rules are a separate issue; interest-deduction treatment does not decide whether a sale gain is taxable.
