Renting part of your home: flatmates, Airbnb, a minor flat and the bright-line test

Renting out part of your home does not automatically make a sale taxable. For a sale agreement signed on or after 1 July 2024, the bright-line main home exclusion has two tests: you must use more than 50% of the land as your main home, and live there as your main home for more than 50% of the bright-line period. Inland Revenue's view is that renting a room to a flatmate does not stop the exclusion. A flat on the section matters only if it takes up half the land or more. Renting the whole house on Airbnb counts against the time test. And the result is all or nothing: fail either test and the whole gain is taxable. Rules checked 10 November 2026.

The two tests: land and time

Inland Revenue's guide IR1229 (March 2026, pages 15 to 23) sets out the current main home exclusion. You must have:

1. used more than 50% of the property's area as your main home, including the yard, gardens and garage, and
2. lived in it as your main home for more than 50% of the bright-line period.

"If either one of these is 50% or less, then the main home exclusion does not apply" (IR1229 p16). There is no apportionment under the current rules: you either get the whole exclusion or none of it.

Both tests only matter if the sale is inside the bright-line period at all, which for current sales means the sale agreement was signed within 2 years of title transferring to you. Our main home exclusion guide covers the exclusion in full, and the main home test calculator counts the days for you.

Two limits apply whatever the use: the exclusion is not available if you have a regular pattern of buying and selling (or building and selling) your main home, or if you have already used it twice in the 2 years before this sale.

Flatmates and boarders

This is the most common arrangement, and the answer is reassuring. Inland Revenue's QB 24/02 (31 May 2024) says the fact that a person rents out a room to a flatmate "does not preclude the main home exclusion applying". IR1229 (p21) repeats it: renting a room to a flatmate generally does not stop the exclusion.

The reason is that the house is still your home. You live there, the flatmate shares it with you, and the land as a whole is still used as your main home.

Inland Revenue's guidance addresses flatmates by name. A boarder who lives in your home with you is a similar arrangement, but we have not seen IRD's bright-line guidance discuss boarders separately, so if your set-up is unusual (several boarders, or a part of the house closed off for them), check it with your accountant.

The rent itself is a separate question. Income from flatmates or boarders has its own income tax rules, and they do not change the bright-line answer.

A flat, sleepout or second dwelling on the section

A minor flat or second dwelling that you rent out is where the land test bites. The question is how much of the property's area you use as your main home, counting the house, yard, gardens and garage you use.

IRD's example in IR1229 (p16) is Mele, who owns a 600 square metre property, lives in 100 square metres of it and rents out the rest. She uses about 16.7% as her main home, so the exclusion does not apply and a sale inside the bright-line period is taxable.

A small flat at the back of a large section is different. If the rented flat and its outdoor area are less than half the land, you still use more than 50% as your main home, and the land test is passed.

Airbnb and short-stay rentals

Short-stay letting can affect either test, depending on how you do it.

Renting a room on Airbnb while you live there

If you live in the house and let a room to guests, you are still living there as your main home, and the land as a whole is still mainly your home. The tests work much as they do for a flatmate, although QB 24/02 is written about flatmates, not short-stay guests.

Renting the whole house while you are away

Time when the whole house is let and you are not living there is not main home time. IR1229 (p17) says use does not have to be continuous: short rentals are fine as long as your total main home time is more than your total non-main home time. In IRD's Kate example, Kate lived in her home for 14 months and rented it out for 4 within the period, and the exclusion still applied.

A house run as short-stay accommodation

A property used as short-stay accommodation and not as your main home gets no main home exclusion. IRD's Marie example is a short-stay property sold within 2 years: taxable. The business premises exclusion does not help either, because IR1229 (pp24 to 25) says it is not available for residential rentals or short-stay accommodation that is not the owner's main home.

A home office or home business

Working from home rarely threatens the exclusion. Even if part of the house is used for your business, the land test asks whether more than 50% is used as your main home.

IRD's Pinky example (IR1229 p16) is a stronger case than most home offices: a shop with living quarters, with 45% of the area used for the business and 55% as Pinky's main home for 55% of the period. The business premises exclusion did not apply, because the property was not used predominantly as business premises, but the main home exclusion did, because both tests were over 50%.

A spare bedroom used as an office is a small share of a typical section, so on its own it should not take you near the 50% line. Claiming home office costs against business income is a separate matter, and those claims are one more reason to keep records of how the house was used.

Worked scenarios

Each scenario below has the same dates: title transfers on 7 February 2025 and the sale agreement is signed on 5 October 2026, inside the 2-year period. That is 606 days, counted inclusive. Results are from this site's main home engine.

The last row is close: a few more weeks of living there would have taken the main home time over 50%. The main home test lets you enter your own move-in and move-out dates.

What failing costs

Take the third row. The owner bought for $820,000 with $3,000 of purchase costs and sells for $905,000 with $24,000 of selling costs, settling in November 2026. Because the land test fails, the whole net gain of $58,000 is taxable, not just a share for the rented units. With $70,000 of other income in 2026/27, the extra tax is $18,897.00.

For sales agreed before 1 July 2024 of property bought on or after 27 March 2021, the old rules apportioned the gain by area and time instead. That no longer applies; see bright-line history.

Records to keep

IR1229 (p48) says you must keep records supporting a main home claim for each year in the bright-line period. If you have rented out any part of the property, that means:

• dates you lived there, and dates the whole house was let;
• a plan or measurements showing which part of the land a flat or unit occupies;
• tenancy agreements, flatmate agreements and booking records;
• evidence the house was your main home, such as your address on bills, your enrolment and where your belongings were.

This is a guide, not tax advice. Mixed use can be finely balanced, especially near the 50% line, so check with your accountant for your situation.

Questions people ask

Does having a flatmate stop the main home exclusion?

Generally no. IRD's QB 24/02 says renting a room to a flatmate does not preclude the main home exclusion applying, and IR1229 says the same.

Does renting my house on Airbnb affect the bright-line test?

Time when the whole house is let and you are not living there is not main home time. Short lets are fine if your total main home time is still more than 50% of the bright-line period.

I rent out a minor flat on my section. Is my home still excluded?

Yes, if you still use more than 50% of the land, including yard, gardens and garage, as your main home. If the rented part takes half the land or more, the exclusion does not apply at all.

Is part of the gain taxed if I fail the land or time test?

For sale agreements from 1 July 2024, no apportionment applies. Fail either test and the whole gain is taxable, provided the sale is inside the 2-year period.