Labour pledges no further changes to landlords' interest deduction if elected
Chris Hipkins confirmed that Labour will not alter the mortgage-interest deduction that landlords use to reduce rental income tax. The decision is linked to the party’s plan to introduce a simple, targeted capital gains tax on investment properties. Hipkins explained that changing the deduction could interfere with the upcoming capital gains framework. Labour previously rolled back the deduction in 2021 before the coalition restored it to 100% by 2025. The party also warned that landlords will eventually face the capital gains tax when they sell their assets.
If elected, Labour will leave the interest-deduction rules for residential landlords unchanged, according to party leader Chris Hipkins. He tied this stance to Labour’s newly finalised proposal for a targeted capital gains tax on the sale of investment properties, noting that altering the deduction could affect that policy. The interest-deduction allowance, which lets landlords offset mortgage interest against rental income, was initially reduced by Labour in 2021 and later restored by one outlet coalition to a full 100% by 2025.
Hipkins said landlords will ultimately be subject to the capital gains tax, and the party will not make further adjustments to the deduction. The proposal includes a 28% capital gains rate on commercial and residential property, excluding primary homes and several other assets, with revenue earmarked for health spending. The stance also differentiates Labour from the Greens, who call for scrapping the landlord tax cuts, and from National, which labels the policy a "Rentals Tax."
