Main home exclusion

The main home exclusion removes a residential property from the bright-line test where the property was used predominantly as the owner's main home.

The core test

More than 50% of the land area — including yard, garden and garage — must have been used for private residential purposes as the owner's main home.

Why investors need to understand it

This is the exclusion most likely to apply to an ordinary sale, and also the one most likely to be assumed incorrectly. It is not a blanket exemption for anyone who has lived in a property at some point.

Where it gets complicated

• You can only have one main home at a time. Where someone owns more than one property, the exclusion generally applies to the one with the greatest connection.
• Part-rented properties — flatting, boarders, or renting out a portion — can fail the more-than-50% test.
• Periods matter. A property that was a rental first and a main home later, or vice versa, may only be partly excluded.
• Trust ownership has its own rules.

Common misunderstanding

"I lived there, so it's exempt" is not the test. The test is about the proportion of land used as your main home, and for what period. Moving into a rental briefly before selling does not reliably create an exclusion, and IRD looks closely at exactly this pattern.

IRD cross-checks property transactions against LINZ data. Purchase and sale dates are visible to them, and they follow up.

Related terms

Sources

• IRD — The bright-line test and main home exclusion

Last reviewed: 1 August 2026 · General information only, not tax advice.

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