Claiming Vehicle Expenses for Your Rental Property in NZ: The IRD Kilometre Rate Method

Here is one landlord expense that a surprising number of people do not claim: the vehicle trips to their rental properties. Inspections. Maintenance visits. Meeting a tradie. Dropping off a notice. These trips cost real money in fuel and wear on your vehicle, and IRD allows you to deduct them as rental property expenses.

You do not need to keep every fuel receipt. You do not need to calculate a percentage of your total vehicle running costs. You just need a log of the trips, and you apply the IRD kilometre rate to the business kilometres you drove.

It is one of the more straightforward deductions available to a small landlord. The reason it gets missed is not complexity. It is that nobody thinks to set up the log until tax time, and by then the year is gone and the trips are forgotten.

The three IRD methods (and why most small landlords pick the kilometre rate)

Before getting into the kilometre-rate mechanics, it is worth knowing that IRD actually gives you three methods to claim vehicle expenses when the vehicle is used for both business (rental) and personal trips. From IRD's own page on claiming vehicle expenses:

• Logbook + kilometre rates. You keep a log of every business trip and multiply the total business kilometres by IRD's published per-kilometre rate. This is what this article focuses on.
• 25% of running costs, no logbook. You add up your full vehicle running costs for the year (fuel, insurance, registration, WoF, maintenance, parking) and claim 25% as the business portion. No log required, but you may be asked to substantiate why 25% reflects your actual business use.
• Actual costs. You keep receipts for every vehicle expense, track every trip's purpose, and claim the exact business-use percentage. You can also claim a depreciation loss on the vehicle. The most paperwork, but the largest deduction if you genuinely use the vehicle for rental purposes a lot.

There is one constraint that catches people out. Once you pick a method for a particular vehicle, you must keep using that method for as long as you own that vehicle. You cannot switch back and forth year by year hunting for the best deduction. So make the choice deliberately the first time.

For most small landlords with one to five properties, the kilometre-rate method is the simplest defensible answer. You record the trips contemporaneously, you apply the official rate at tax time, and there is no judgement call about what percentage of your car is "business use". The next sections cover that method in detail. The 25% and actual-cost methods come back later in the article.

How the IRD kilometre-rate method works

IRD publishes kilometre rates (sometimes called the "kilometre rate method" or "mileage rate") that small businesses and self-employed people, including landlords, can use to calculate vehicle expenses. The rate is meant to cover the per-kilometre cost of running a vehicle: fuel, oil, tyres, depreciation, registration, insurance, averaged across the fleet.

The mechanics are simple. You keep a log of every business trip. For each trip you record: date, start location, destination, purpose, and distance. At the end of the year, you add up the total business kilometres and multiply by the relevant rate. That is your deductible vehicle expense. Done.

No receipts to keep. No allocation percentages. No depreciation calculation (kilometre rates already include depreciation, so you cannot claim it separately).

The one condition IRD imposes: you must be able to show that the travel was genuinely for rental income purposes. "Drove to inspect property at 14 Smith Street" satisfies that. "General property errands" does not.

Tier 1 and Tier 2 - which rate applies to you

IRD's kilometre rates have two tiers. Most small landlords will only ever encounter Tier 1, but it is worth understanding the difference.

Tier 1 applies to the first 14,000 kilometres of your total annual motor vehicle travel (business and personal combined). If your car travels less than 14,000 kilometres in a year in total - including commuting, personal trips, and property visits - you are in Tier 1 for all of your business kilometres.

If your total annual travel is over 14,000 kilometres, Tier 1 applies to the first 14,000 km (with the business portion of those calculated proportionally), and Tier 2 (a lower rate) applies to the portion above 14,000 km. The mechanics get a little more involved at that point.

The practical reality for most small landlords: you probably do not do 14,000 kilometres a year just visiting a few rental properties, even if you are also driving for personal reasons. Tier 1 is the relevant number.

How rates get published - and what to do this year

This is the part most articles get wrong, and it is your responsibility to get right. IRD publishes the kilometre rates after each tax year ends on 31 March, and usually has them up by May. That means the 2025-2026 rates (for the tax year that just ended 31 March 2026) are typically published around May 2026. If you are reading this and the new rates are not yet on IRD's claiming vehicle expenses page, they have not yet been finalised.

The 2024-2025 Tier 1 rates per kilometre, for context, were: petrol $1.17, diesel $1.26, petrol hybrid $0.86, electric $1.08. Those are the most recently published as of this article. The 2025-2026 figures will be similar but not identical - they typically move with fuel prices and vehicle running costs.

Two practical implications. First, when you are filing your tax return, you use the rate for the year you are claiming, not the current year's rate. So your 2024-25 IR3 uses the 2024-25 rate. Confirm it on the IRD page before filing - they have a dedicated page per year.

Second, if the year you are claiming has not yet had its rate published, IRD's own guidance is clear: for reimbursements, "the current rate applies until we provide the new rate." In practice, this means using the most recently published rate as a working figure is reasonable, and you can square it up against the official rate once IRD publishes. IRD understands the timing gap because they created it.

This is also why I will not list specific current rates in the body of this article. By the time you read this, the rates may have moved. Always pull the current figure from IRD's page before you file. It takes 30 seconds and is the only authoritative source.

A worked example

Say you have two rental properties, both about 15 kilometres from home. Quarterly inspections (four times a year each), plus you drive a petrol car.

Eight inspections a year, 30 km round trip each = 240 km.

Add two maintenance callout trips per property across the year (just tradespeople to meet and let in) - another 120 km.

360 km at $1.17 per kilometre (the 2024-25 petrol rate, as a placeholder) = $421.20 in deductible vehicle expenses. Not a fortune, but it is money you are entitled to claim and it takes almost no effort if you keep the log properly.

Add in a few tradie meetings that went long, a trip to pick up replacement smoke alarm batteries, the drive to post a notice, and the number grows. Four properties, as I have, multiplies it further.

What your log needs to contain

IRD does not specify a required format, but your log needs to be able to substantiate each trip. The essentials:

• Date of the trip
• Starting point (usually "home" is fine)
• Destination (property address, or "14 Smith Street")
• Purpose (inspection, maintenance visit, met electrician, dropped off notice, etc.)
• Kilometres driven (round trip or one-way with return noted)

A simple spreadsheet with those five columns handles this fine. You can also use a notes app on your phone, a notebook in the glove box, or software that records it for you. The format does not matter. The completeness does.

The log needs to be kept contemporaneously, meaning at the time (or close to it), not reconstructed from memory six months later. IRD auditors can tell the difference between a log updated regularly and one manufactured in a rush before filing.

The part people consistently miss: the return trip counts

When I say "round trip," I mean it. If you drive 15 km from home to your rental property and 15 km back, you log 30 km, not 15. Both directions are business travel. This sounds obvious, but I have seen landlords who have been under-claiming by half.

You also do not need to be driving from home. If you drive from your regular job to a property, you can claim that trip. The business travel starts from wherever you were and goes to wherever the rental purpose required you to be.

The exception IRD is explicit about: home-to-work commuting is not business travel. Driving from your house to your day job is personal. The rental travel only starts at the point you divert from the personal-trip plan.

How RentManager handles this

When I was building RentManager NZ, this was one of the tax-time annoyances I wanted to solve properly. The problem is that the vehicle expense is not attached to the calendar - it is attached to whatever prompted you to visit the property. An inspection generates a trip. A maintenance visit generates a trip. The link should be automatic.

So I built it that way. In RentManager, you set a one-way distance from your home base to each rental property once. You set your vehicle type (petrol, diesel, hybrid, electric) once on your account. Then every time you complete a property inspection in the software, the trip is recorded automatically against that property: date, round-trip kilometres, purpose, vehicle type. The dollar value is calculated when you view the record, using the IRD rate for your vehicle type. You can add manual trips for maintenance callouts, tradie meetings, or any other rental-purpose drive.

The deliberate design choice: the trip data is what is recorded, not a hardcoded dollar amount. The km, the purpose, the date - those do not change. The IRD rate does change, year to year, and sometimes mid-year while we are waiting for the new figure to publish. By keeping the trip as the source of truth and looking up the rate at view time, your historical trips can be re-priced against whichever year's rate applies when you actually file. That is the right model for a deduction that gets calculated in retrospect.

At tax time, the deductible vehicle expenses for each property are already in the system - dated, categorised, against the right property, ready to pull into a P&L report.

I built this because I wanted it myself. Four properties, quarterly inspections, regular maintenance - the trips add up and I was consistently under-claiming before I had a proper process. Now I do not think about it.

RentManager NZ (rentmanager.nz) is $9/month for one property, $19/month for up to five. If the mileage tracking is the feature you care about, it is on the Standard plan. New Zealand-hosted, for New Zealand landlords.

The 25% alternative - when it might make sense

If you genuinely cannot face keeping a logbook, IRD's second option is to skip the log entirely and claim a flat 25% of your total vehicle running costs as the business portion. That covers fuel, insurance, registration, WoF, maintenance, and parking, all added together for the year. You multiply the total by 25% and that is your deduction.

The pitch is convenience. No log, no per-trip discipline. The catch is in IRD's own language: "you may be asked to substantiate the percentage claimed". If IRD audits you and decides that 25% is unrealistic for the actual amount of rental driving you did, they can reduce the claim. With no log, you have nothing to point to as evidence.

For one or two rental properties in the same suburb you live in, 25% is almost certainly over-claiming. For someone who drives an hour each way to a property in another region, 25% might be under-claiming. The number is a blunt instrument and the audit risk is real.

My honest take: if you are not going to keep a log, accept that you should claim less, not more. Take the 25% only if you can defend the actual business proportion to an auditor.

The actual-cost method - when it pays to do the full paperwork

The third method is the full version. You keep every receipt - fuel, insurance, registration, WoF, maintenance, parking, financing costs. You also track every trip and calculate the exact business-use percentage. You can also claim a depreciation loss on the vehicle's purchase price. The deduction is the actual business proportion of the actual costs, plus depreciation.

This is the right answer if your vehicle is heavily used for rental purposes - regular long drives to regional properties, large maintenance loads requiring trips to the hardware store, that kind of thing. The total deductible amount can be materially larger than the kilometre-rate calculation. And if you bought a new ute that depreciates fast, the depreciation loss alone can dwarf the running costs.

The cost is the paperwork. You need every receipt, the calculation is more involved, and your accountant will charge for the time. For a one-to-four-property landlord doing inspections a couple of times a quarter, it is almost certainly overkill.

Once again: once you pick a method for a vehicle, you have to stick with it. If you start with actual costs and discover you would have been better off with the kilometre rate, you cannot switch until you replace the vehicle.

The closing point: keep the log, contemporaneously

Whichever method you settle on, the discipline that gets results is the same: capture the trip details on the day, not in April when you are filing. If you are using the kilometre method, that means logging each rental trip. If you are using actual costs, that means logging the trip AND the receipt at the same time.

The kilometre rate is simple, defensible, and the rates IRD publishes are designed to be roughly fair. The 25% method is easy but risky. The actual-cost method is the largest deduction for genuinely heavy users but the most paperwork. Pick the one that fits how you actually use the vehicle, commit to it, and start logging today, not next January.

And whatever method you use, the canonical reference is IRD's claiming vehicle expenses page. Bookmark it. Check the current rates there each May before filing. It is the only source that is always correct.