Depreciation on rental property allows landlords to claim a tax deduction for the gradual loss of value of depreciable assets. In New Zealand, the building itself is not depreciable (since 2011), but furniture, appliances, and other separate items (chattels) can be depreciated at IRD’s set rates — reducing your taxable rental income each year.
Residential rental buildings are not depreciable in NZ. However, chattels (carpet, curtains, appliances, furniture) can be depreciated using IRD's set rates. Items costing up to $1,000 can generally be written off in the year of purchase. Set up an asset register listing each chattel, its purchase price, and annual depreciation — this is essential for accurate tax filing and maximising your deductions.
Building Depreciation: Not Available
Since 2011, residential buildings cannot be depreciated. Non-residential buildings could be depreciated again for the 2021 to 2024 income years, but the rate returned to 0% from the 2025 income year, and residential buildings were not restored.
What this means:
- The building structure, walls, roof, and foundations: not depreciable
- The land: never depreciable (land does not wear out)
- Chattels within the building, such as carpet and appliances: depreciable
What Can Be Depreciated
Chattels (Depreciable)
Chattels are moveable assets within the property — they are separate from the building structure itself. Common depreciable chattels:
| Chattel | Method | Rate | Notes |
|---|---|---|---|
| Carpet | DV | 25% | Per room; replaced separately |
| Curtains and blinds | DV | 25% | |
| Dishwasher | DV | 30% | |
| Fridge/freezer | DV | 25% | |
| Washing machine | DV | 30% | |
| Dryer | DV | 30% | |
| Stove/oven (freestanding) | DV | 25% | |
| Microwave | DV | 50% | Short useful life |
| Heat pump (through wall or window type) | DV | 20% | Other heat pumps depend on how firmly they are attached to the building |
| TV | DV | 40% | |
| Furniture (tables, beds, sofas) | DV | 20% | |
| Light shades fitted to a standard light fitting | DV | 20% | The light fittings themselves are part of the building |
| Hot water cylinder | DV | 13% |
DV = Diminishing Value. SL = Straight Line (also available for most assets).
Fixed Fittings (Sometimes Depreciable)
Fixed fittings that are part of the building structure are generally not separately depreciable. Fittings that can be removed and replaced independently may be depreciable:
- Fixed carpet: depreciable as a chattel
- Built-in kitchen appliances (integrated dishwasher, oven): may be depreciable depending on whether classed as building fixtures
When in doubt, check IRD’s depreciation rate finder and calculator at ird.govt.nz/depreciation.
Depreciation Methods
Diminishing Value (DV)
The rate is applied to the declining book value each year. Higher deductions in early years; declining over time.
Year 1: $5,000 × 25% = $1,250 deduction. Closing value: $3,750. Year 2: $3,750 × 25% = $938 deduction. Closing value: $2,812. Year 3: $2,812 × 25% = $703 deduction. And so on.
Straight Line (SL)
A fixed percentage of the original cost is deducted each year, so the deduction stays the same until the cost is fully claimed (the last year can be a smaller amount). IRD publishes equivalent SL rates alongside DV rates.
Year 1: $5,000 × 17.5% (SL equivalent) = $875 a year, until the $5,000 is fully claimed (the sixth year is $625).
The diminishing value method gives larger deductions in the early years, but the total you can claim over an asset’s life is the same for both methods.
Low-Value Asset Write-Off ($1,000 or Less)
Assets costing $1,000 or less (exclusive of GST if GST-registered) can be written off in full in the year of purchase — no need to set up a depreciation schedule.
This does not apply to items bought from the same supplier at the same time that share a depreciation rate. For example, 12 dining chairs bought together from one supplier for $1,200 ($100 each) share a depreciation rate, so the immediate write-off does not apply to them and they are depreciated instead.
Setting Up an Asset Register
An asset register is a spreadsheet or accounting record listing each depreciable chattel. For each item include:
- Description
- Date acquired
- Purchase price (exc. GST if registered)
- Depreciation method and rate
- Opening book value (start of year)
- Depreciation claimed this year
- Closing book value (end of year)
Example asset register entry:
| Asset | Acquired | Cost | Rate (DV) | Opening value | Depreciation | Closing value |
|---|---|---|---|---|---|---|
| Heat pump (through-wall or window type) | Apr 2023 | $3,200 | 20% | $2,048 | $410 | $1,638 |
| Carpet (lounge) | Apr 2022 | $2,800 | 25% | $1,575 | $394 | $1,181 |
| Fridge | Mar 2025 | $900 | — | $900 | $900 (write-off) | $0 |
Depreciation Recovery on Sale
When you sell a rental property that includes depreciable chattels, you must account for depreciation recovery (also called “claw-back”):
If you sell a chattel for more than its current book value, the difference is taxable income in the year of sale, but the amount counted is capped at the depreciation you have claimed (or are treated as having claimed).
Example:
- Washing machine purchased for $1,200, book value after depreciation = $600
- You sell the property and the washing machine is valued at $800 in the sale
- Depreciation recovery: $800 − $600 = $200 taxable income
This is why getting a chattel valuation report at purchase (to establish the initial values) and maintaining accurate records throughout ownership is important.
Chattel Valuation at Purchase
When you buy a rental property, you need to work out the value of the chattels separately from the building and land. A registered valuation is one way to do this. It:
- Establishes the opening book value for depreciation purposes
- Sets each chattel’s value on a market value basis, as IRD asks
- Provides documentary evidence for IRD
If you have a registered valuation, IRD says to use the total value of all the chattels and split it across them by market value.
Frequently Asked Questions
Can I depreciate the property I just purchased on a new mortgage?
You can depreciate the chattels within the property. The building itself (structure) cannot be depreciated. If you purchased a furnished property, you need to work out the value of the chattels: use a registered valuation if you have one, or each item’s market value if not.
What happens to depreciation if the property is vacant?
Depreciation can continue while the property is vacant, as long as it is available to rent. The claim is reduced for months when it is neither rented nor available.
My tenant damaged the carpet. Can I claim this?
Yes. If a tenant damages a chattel, you can claim the repair cost (normally deductible) or, if the item is scrapped or replaced early, the difference between its remaining book value and any sale price in that year. If insurance pays for the repair, you cannot also claim the part it covered.
Can I depreciate assets I purchased for the property before it became a rental?
Only from when the property is rented out or available to rent. If you lived in the property before renting it out, you use the market value of the chattels at the time you start renting as the starting value for depreciation.