Selling a rental property in NZ: tax steps from listing to filing

Selling a rental you have owned for more than 2 years since title registered is usually outside the bright-line test, though the intention test can still apply. Inside 2 years, the profit is taxable at your marginal rate unless an exclusion applies, and a rental rarely qualifies for one. If it is taxable, you deduct the purchase price, purchase costs, capital improvements and selling costs, complete an IR833 for the property, and include your share of the profit in your IR3 for the income year in which the sale settles. Keep the records for at least 7 years.

Step 1: before you list, check whether the sale is caught

Rules checked 10 November 2026. This is a guide, not tax advice; check with your accountant for your situation.

Work through these questions before you sign anything:

1. Did you buy it intending to resell? Land bought with a firm intention or purpose of resale is taxed whenever it is sold, and that rule is checked before the bright-line test. Renting it out in the meantime does not change that. See the intention test.
2. When was title registered to you? That is your bright-line start date. The 2 years run from there to the day you sign a binding sale agreement.
3. Does an exclusion apply? A rental is not business premises, and the main home exclusion only helps if you lived there for more than half the period and used more than half the land. Inherited property is not taxed under the bright-line test.

The is my gain taxable checker runs through these in order. If you are a dealer, developer or builder, different rules apply and IRD's bright-line guide is not written for you.

Step 2: time the sale agreement

The end date is the day you enter a binding sale and purchase agreement, "even if some conditions like getting finance or a building report still need to be met," as Inland Revenue's IR1229 puts it. Listing the property, open homes and receiving offers do not end the period. Signing does.

If you are close to the 2-year mark, find the first clear date before you list. For the example below, title registered on 1 September 2025, so the second anniversary is 1 September 2027, and the bright-line end date finder gives 2 September 2027 as the first day a sale agreement is clear on any reading. Our bright-line dates guide explains why the anniversary day itself is uncertain.

Settlement does not change whether the sale is caught, but it does decide which tax year the profit falls in. More on that in step 5.

Step 3: work out your cost base

On a taxable sale you deduct the cost of the property at the time of sale. IR1229 lists:

• the purchase price
• costs of buying, such as lawyers, valuers, surveyors and real estate agents
• capital improvements after you bought, such as renovations
• costs of selling, such as lawyers and real estate agent fees.

You cannot include anything you have already deducted. That matters for a rental, because the running costs are treated differently:

IR1229 warns that holding costs "may have already been claimed in your income tax return against rental income. You must make sure you do not double claim these expenses." Interest on residential rentals was only partly deductible up to 31 March 2025 and is fully deductible from 2025/26, so the last row only affects interest from earlier years.

One more item can add income: if you claimed depreciation on an asset, such as a chattel, and sell it for more than its adjusted tax value, the difference is taxable. Our deductible costs guide has more examples.

Step 4: worked example

Say you sign to buy a rental on 5 August 2025 for $650,000, and title is registered to you on 1 September 2025. Legal fees on the purchase are $2,500. You build a carport for $18,000, a capital improvement. On 1 February 2027 you sign a binding agreement to sell for $735,000, paying $22,800 in agent commission and legal fees. The sale settles on 5 March 2027. Your other taxable income for 2026/27, salary plus net rent, is $76,000. This site's engine gives:

The sale agreement on 1 February 2027 is before the 1 September 2027 anniversary, so the sale is inside the period. Signing on or after 2 September 2027 would have taken it outside the bright-line test. To run your own figures, use the bright-line tax calculator.

If you own it with someone else

Co-owners are each taxed on their share. IR833 multiplies the net profit by your ownership percentage. If this rental were owned 50:50, each owner would have $20,850. The tax then depends on each owner's other income:

Step 5: which tax year, and when to file and pay

IR1229 says "Usually, the date of settlement will determine the income year the income should be included." The income year runs from 1 April to 31 March. In the example, settlement on 5 March 2027 puts the profit in 2026/27. Had settlement been on 9 April 2027, the same profit would fall in 2027/28 and be filed a year later. We have used 2026/27 rates because 2027/28 rates are not yet known; on those rates the tax is the same $13,698.00.

For a profit in 2026/27, the usual deadlines are:

A large one-off profit can also affect provisional tax. If your residual income tax for a year is more than $5,000, Inland Revenue's rules can require provisional tax for the following year. Talk to your accountant about how that applies when the profit will not recur.

Step 6: complete the IR833 and your IR3

Before filing, IR1229 says you need to complete a Bright-line property sale information (IR833) form "for each residential property you have sold or disposed of that is taxable under the bright-line test." You can do it during the year or at year end, on paper or in myIR. The form asks for:

Your share of the profit goes in the "Net bright-line profit" box of the residential property question in your IR3. In myIR it pre-populates from the IR833, but IR1229 notes "It is your responsibility to make sure this is correct."

The rent you earned up to settlement is reported in the IR3 as usual, under the residential rental rules. If those deductions were more than your rent in earlier years, the excess was ring-fenced and carried forward. Excess deductions are released against other income only when an individual property, or the last property in a portfolio where every sale was taxable, is sold in a taxable sale. Our ring-fenced losses guide covers both kinds of loss.

If you sell at a loss, or from overseas

A loss on a taxable sale is ring-fenced. IR1229 says do not include it in your return; keep your own record and carry it forward. It can only be used against bright-line profits or other taxable land sale income, never against salary, rent or business income. IRD's example is Zac, whose $60,000 bright-line loss in 2024 reduced a later $100,000 land profit to $40,000.

Offshore sellers may have residential land withholding tax (RLWT) deducted at settlement. That includes a New Zealand citizen who has been overseas continuously for the last 3 or more years. If you then include the taxable sale in your return, you claim the RLWT as a credit. See selling from overseas.

Step 7: keep the right records

IR1229 says "You need to keep all your records for at least 7 years." You do not send them with your return, but Inland Revenue can ask to see them. For a rental sale, keep:

• signed sale and purchase agreements, for both the purchase and the sale
• settlement statements for both
• invoices for legal, valuation, survey and agent fees on the purchase and sale
• evidence of capital improvements: consents, architect and engineer fees, invoices for labour and materials
• bank statements, a copy of your mortgage agreement and your working papers
• a list of assets with cost price and purchase date, especially anything you depreciated
• your record of any bright-line or rental losses carried forward.

Records must be in English or Māori unless Inland Revenue has agreed otherwise. If you lived in the property for part of the time and want to claim the main home exclusion, you also need records for each year of the bright-line period. For how the profit is taxed, see how the gain is taxed.

Questions people ask

Do I pay tax when I sell a rental property in NZ?

Only if the sale is caught. Under the bright-line test, a sale agreed within 2 years of title registering to you is taxable. After that, tax only applies if another rule, such as the intention test, catches it.

Can I deduct mortgage interest from the bright-line profit?

Not if you already claimed it against rent, which is the usual case for a rental. Interest you could not deduct under the interest limitation rules is added to the cost on a taxable sale.

What form do I use to report a bright-line sale?

Complete an IR833 for each taxable property, then put your share of the net profit in the Net bright-line profit box of your IR3. In myIR the figure pre-populates from the IR833.

How long should I keep records after selling a rental?

At least 7 years. That includes the purchase and sale agreements, settlement statements, invoices for costs and improvements, and your working papers.