Boarders and Flatmates: The Tax Difference
🏠 Three arrangements, three tax outcomes
Taking someone into your home to help with the bills sounds simple, but Inland Revenue treats three very similar-looking arrangements in three different ways. Flatmates who split the running costs of a house create no taxable income for the person collecting the money, because sharing costs is not the same as earning income. Boarders, who pay you for board such as meals and services, can create taxable income, but Inland Revenue publishes a weekly standard-cost amount per boarder that is treated as covering your costs, so income up to that amount per boarder is not taxed. A tenant, who rents a room or a property from you under a tenancy, is different again: that is rental income, taxable on the actual money in and out. Getting the label right decides whether you owe any tax at all. This guide walks through each case with current 2026 figures and hand-checked New Zealand examples.
The quick comparison
| Arrangement | What it is | Tax treatment |
|---|---|---|
| Flatmate | People sharing a home and splitting the running costs | Cost sharing, not income. No tax on money collected to cover shared costs |
| Boarder | Someone who pays you for board, including meals and services, in your home | Standard-cost method: tax-free up to the weekly standard cost per boarder |
| Tenant | Someone renting a room or property from you under a tenancy | Rental income, taxable on the actual-cost basis |
The line between a boarder and a flatmate is whether you provide services. A flatmate just shares the house and its costs. A boarder pays you for board, meaning part of what they pay covers meals, laundry or other services you provide. That is why boarders get their own tax method and flatmates do not.
How this guide differs from the rental income guide
Our tax on rental income guide covers renting out a whole property as an investment: declaring the rent, claiming interest, rates and other costs, and filing the return. This guide is about the very different situation of sharing your own home, where the money you receive may not be income at all. If you are renting out a separate investment property, read the rental income guide. If you are taking a boarder or flatmate into the home you live in, you are in the right place.
The words are used loosely in everyday life, but the tax outcomes are opposite. Genuine cost-sharing among flatmates is not taxable. Renting a room to someone as a tenant, or renting out a separate property, is taxable rental income. If you own the home and are making a profit from the people living in it, that profit can be taxed, whatever you call them.
📊 Boarders and the standard-cost method
Boarders are the case where a simple rule saves most people from any tax at all. When you have a boarder, Inland Revenue lets you use a published weekly standard cost that is treated as covering what it costs you to house and feed that boarder. If what the boarder pays you is no more than the standard cost, there is nothing to tax, nothing to declare and no records to keep. You only pay tax on the amount, if any, by which the payments exceed the standard cost.
The current weekly standard cost
For the 2025-2026 income year, the standard cost is $245 per week for each boarder. This is the most recently published rate. Inland Revenue reviews it every year and adjusts it for inflation using the Consumers Price Index, so check the current figure before you file. The same rate applies to each boarder you have, for up to four boarders.
Older guidance used a higher rate for the first two boarders and a lower rate for the third and fourth. That split ended with the 2019-2020 income year. Since then a single uniform weekly rate applies to every boarder, up to the maximum of four.
The number-of-boarders rule
The standard-cost method is designed for a household taking in a few boarders, not for running a boarding house. You can use it for up to four boarders. If you have five or more boarders or home-stay students, you cannot use the standard-cost method at all and must use the actual-cost method instead, working out your real income and real expenses. At that scale, Inland Revenue treats the activity more like a business.
If your board is below the standard cost
When your total board for the year is at or below the total standard cost for your boarders, the income is not taxable. You do not need to file a return for it, keep records of the related expenses, or pay any tax on it. This is the situation most people who take in one or two boarders find themselves in, because typical board payments in New Zealand sit close to or below the standard cost.
If your board is above the standard cost
If your board is more than the standard cost, only the excess is taxable. You add that excess to your other income for the year and it is taxed at your marginal rate. You declare it in your income tax return. If your real costs are higher than the standard cost, you can instead choose the actual-cost method and claim your genuine expenses, but you cannot mix the two: for a given year you use either the standard-cost method or the actual-cost method, not both.
The standard-cost method is a simple shortcut that removes the need to track expenses. The actual-cost method needs real records but can suit you if your costs are high or you have five or more boarders. You choose one method for the year. You cannot claim the standard cost and your actual expenses for the same boarders.
🤝 Flatmates and tenants
Boarders get a tidy rule of their own. Flatmates and tenants sit at the two ends of a different spectrum: pure cost-sharing at one end, and taxable rental income at the other. Knowing which end you are at is the whole game.
Flatmates: sharing costs is not income
The everyday flatting arrangement is cost-sharing. A group rents or lives in a house and splits the rent, power, internet and other running costs between them. If you, or someone in the flat, collects each person's share to pass on to the landlord or to pay the bills, that money is not taxable income. You are not making a profit; you are dividing costs. There is nothing to declare and nothing to file for it.
Cost-sharing stays tax-free while it genuinely just covers costs. If you own the home and charge your flatmates more than their fair share of the running costs, so you come out ahead, that profit can be taxable. In that case you work out the taxable amount using the actual-cost method, counting the income and claiming the share of expenses that relates to the rented space.
Owning the home changes the picture
When you are a tenant yourself and simply split the landlord's rent with your flatmates, cost-sharing is straightforward and tax-free. When you own the home, you have costs a renter does not, such as mortgage interest, rates and insurance, and you may be making a profit from your flatmates without realising it. If you are, that profit is taxable and you should work it out on the actual-cost basis, claiming the portion of your home costs that relates to the flatmates' use.
Tenants: this is rental income
A tenant is different from both a flatmate and a boarder. If you rent a room or a self-contained property to someone under a tenancy, the rent is taxable rental income, and there is no standard-cost shortcut, because you are not providing board. You return the actual rent you receive and claim the actual, apportioned expenses that relate to the rented space. This is ordinary residential rental, and the same rules apply as for any rental property, including full interest deductibility and the loss ring-fencing rules covered in our tax on rental income guide.
Renting out a room as a tenancy, rather than taking a boarder or sharing costs with flatmates, produces taxable rental income from the first dollar of profit. The standard-cost method does not apply, because a tenant is paying for accommodation, not for board and services. Keep records and declare the income.
Which one are you?
- You split the landlord's rent with the people you live with: flatmates, cost-sharing, not taxable
- You provide meals or services and are paid board in your own home: boarder, standard-cost method applies
- You own the home and make a profit from the people living in it: taxable on the actual-cost basis
- You rent a room or property to someone under a tenancy: tenant, taxable rental income
🔢 Worked Examples
These four New Zealand examples use the current standard cost of $245 a week per boarder (2025-2026 income year), with hand-checked figures. A year is taken as 52 weeks.
Situation: Wiremu and Anahera take in two students as boarders, providing a room and evening meals. Each boarder pays $220 a week. The Taylors want to know if they owe any tax.
Situation: Rachel has one boarder who pays $340 a week, including all meals. That is more generous board than the standard cost allows for, so some of it is taxable. Rachel is on the 30% marginal tax rate.
Rachel is not taxed on the whole $17,680. The first $12,740 is covered by the standard cost. Only the $4,940 above it is added to her income and taxed. She declares that $4,940 in her return. If her real costs of hosting the boarder were higher than $12,740, she could instead use the actual-cost method, but not both in the same year.
Situation: Josh and two friends rent a three-bedroom house together. The total rent is $780 a week. Josh is the one named on the tenancy agreement, so he collects each flatmate's share and pays the landlord. He wonders whether the money passing through his account is taxable income.
Situation: The Nguyens own a property with a separate self-contained unit and rent it to a tenant under a tenancy at $520 a week. No meals or services are provided, so this is rental income, not board. They are on the 33% marginal rate.
Because the Nguyens rent to a tenant and provide no board, the $245 standard cost does not apply. This is ordinary residential rental income: they return the actual rent and claim the actual expenses. The full interest-deductibility and loss ring-fencing rules apply, which our rental interest deductibility guide explains in detail.
Related tools and guides
- Tax on rental income guide: the broad guide to renting out a property as an investment
- Rental interest deductibility guide: how interest and ring-fencing work for a tenancy
- Rent affordability guide: working out what rent you can comfortably manage
- Rental yield and investment guide: measuring the return on a rental
- Rent affordability calculator: check what portion of your income rent takes
Sources: Verified against Inland Revenue (ird.govt.nz): Standard cost method for boarders and home-stay students (weekly rate of $245 for the 2025-2026 income year, one uniform rate for up to four boarders, five or more boarders must use the actual-cost method); Renting out a room in my main home; and Working out expenses when you live in the property. Figures current as at 24 July 2026; Inland Revenue reviews the weekly standard cost each year.
🎯 Test Your Knowledge
Complete this 10-question quiz to check your understanding of the tax difference between boarders, flatmates and tenants
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