A landlord bought an existing rental in 2022 with a mortgage. How much of the mortgage interest on that rental can she claim as a deduction for the income year starting 1 April 2025, under Inland Revenue's interest limitation rules?
Correct Answer
D) All of it: 100% of the interest is claimable from 1 April 2025.
Inland Revenue says that from 1 April 2025 you can claim 100% of the interest you incur on residential rental property. For 1 April 2024 to 31 March 2025 the figure was 80%, whenever the property was bought. The interest must still meet the general deductibility rules and cannot be private.
Why This Is the Correct Answer
From 1 April 2025 interest on residential rental property is fully deductible.
Why the Other Options Are Wrong
Option A: 80%, because the phase-in for existing rentals ends only in 2026.
80% applied to interest incurred from 1 April 2024 to 31 March 2025; from 1 April 2025 it is 100%.
Option B: None, because interest on existing rentals bought after March 2021 is disallowed.
The interest limitation rules were reversed; from 1 April 2025 full deductions are available however recently the property was bought.
Option C: Half, because only loans drawn before 27 March 2021 get full deductions.
When the loan was drawn mattered for the 2022–2024 years only; from 1 April 2025 it makes no difference.
Background Knowledge for Finance
Source: https://www.ird.govt.nz/property-interest-rules
Exam Tip for Finance
Interest deductibility: 80% for 2024–25, 100% from 1 April 2025.
Common Mistakes to Avoid on Finance Questions
- •Applying the old rule that denied interest on properties bought after 27 March 2021.
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