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ContinueUnderstanding rental property taxes and rental property tax deductions is essential if you want to operate a profitable rental portfolio.
Many landlords overpay on taxes simply because they’re not taking full advantage of the available tax deductions for rental property.
Whether it’s forgetting to claim mileage, misclassifying repairs, or not tracking expenses properly throughout the year, these missed deductions can add up, costing you thousands over time.
Understanding what you can and can’t deduct is essential to maximizing your rental income and staying compliant with IRS rules.
In this guide, we’ll walk through the most common tax deductions for rental property explain how they work, and show you how to make tax time less stressful and more profitable with property management and accounting software like Landlord Studio.
To operate a profitable rental property portfolio, you need to have a comprehensive understanding of the ins and outs of rental property taxes. This means:
Yes. Although all rental income is taxable, you can lower your taxable income by deducting expenses related to mortgage interest, maintenance, property management, and more. We dig into the different rental property tax deductions later in the article.
You must report your earnings and related expenses on IRS Schedule E (Form 1040). This form details supplemental income and losses for rental real estate, royalties, partnerships, and similar income sources.
There are several powerful tax benefits when investing in rentals, especially when it comes to ongoing expenses. While strategies like 1031 exchanges and depreciation often get the spotlight, it’s the day-to-day tax deductions for rental property that can have the biggest impact on your annual cash flow.
Below, we cover 15 of the most common tax-deductible expenses for rental property owners and how to ensure you never miss a deduction again.
Interest is often one of the largest deductions for landlords. And you can see why, the IRS allows you to deduct the interest from a variety of loan types including:
Tip: Keep clear records of each type of loan and its purpose.
With Landlord Studio, you can link your bank accounts to automatically track and categorize interest-related transactions for accurate reporting at tax time.
Depreciation allows you to deduct the cost of your rental property (minus land value) over what the IRS deems its ‘useful life’. This is 27.5 years for residential properties or 39 years for commercial.
Example:
If you buy a property for $350,000 and the land is worth $75,000:
($350,000 - $75,000) / 27.5 = $10,000/year in depreciation
Watch out: Depreciation can be complex, especially when capital improvements and cost segregation studies come into play. Work with a CPA to get your depreciation schedule right.
Bonus Tip: Be prepared for depreciation recapture when selling the property—it’s taxed as ordinary income.
Repairs and maintenance often come unexpectedly and can quickly add up, affecting the cash flow and overall profitability of your rentals. Thankfully, the cost of maintenance and repairs qualify as rental property tax deductions and can be fully reclaimed at the end of the tax year.
Repairs are defined as any effort to maintain the current condition of the property, and provided they are “reasonable, necessary, and ordinary,” they can be fully deducted in the year in which they occur.
Examples of repairs include:
Maintenance costs are a little different. These are necessary expenses related to maintaining the property’s current condition, not fixing things that are broken.
A few examples of claimable maintenance expenses:
Landlord Studio’s maintenance tracking feature helps you stay on top of maintenance tasks, allowing your tenants a centralized system for submitting maintenance requests so you can track and prioritize jobs in real time.
The cost of personal property such as furnishings, appliances, or equipment used in a rental can usually be deducted in one year using the de minimis safe harbor deduction (for property costing up to $2,000).
Example: A $1,200 refrigerator or $900 lawnmower used in the rental.
Section 199a Qualified Business Income Deduction, otherwise known as the pass-through tax deduction, lets U.S. taxpayers deduct as much as 20% of their business income that comes from “pass-through” entities such as:
Note: This deduction was scheduled to expire after the 2025 tax year. However, the One Big Beautiful Bill currently being reviewed in the Senate seeks to extend this and several other tax cuts introduced in Trump’s first term.
Landlords are entitled to a rental property tax deduction for most of the driving and travel undertaken to manage and maintain their rentals. For example, you can deduct travel expenses when you drive to your rental building for a routine inspection or to deal with a tenant complaint, or when going to the store to purchase parts for necessary repairs.
If you drive between your rentals for business purposes, you can:
Note: To qualify for the standard mileage rate, you must use it in the first year you use a car for your rental activity.
If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other expenses.
To stay within the law (and avoid unwanted attention from the IRS), make sure you properly document all of your travel expenses.
Use Landlord Studio’s mileage tracker to automatically record and log deductible mileage directly from your phone.
Paying a handyman, cleaner, property manager, or any employee/contractor to assist with your rental is tax-deductible. Be sure to:
Are property management fees tax-deductible? Yes. Fees paid to management companies or for landlord software are deductible as operating expenses.
Other tax-deductible rental property expenses in line with this include rental listing fees and other costs associated with securing new tenants.
DIY landlord? Property management software like Landlord Studio is also a deductible expense!
You can deduct the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as landlord liability insurance. And if you have employees, you can deduct the cost of their health and workers’ compensation insurance.
Related: Should you Form an LLC for your Rentals
The final item on this list is the fees you pay to accountants, attorneys, advisors, or other professionals who help you in the running and management of your real estate business.
You can deduct these fees as operating expenses as long as the fees are paid for work related to your rental activity. Visit the IRS Website for more information.
If you pay for utilities on behalf of your tenants, those costs are fully deductible:
Pro tip: If utilities are included in rent, make sure to separate the utility portion for accounting clarity.
Do you manage your rentals from a dedicated space in your home? You may qualify for a home office deduction. You can choose:
Note: This must be a dedicated space used exclusively for rental activity.
Expenses to market your rental are deductible:
Landlord Studio allows you to track listing costs and tenant acquisition expenses in one place.
From pens and printer paper to accounting software and cloud storage—if it’s used for your rental business, it’s deductible.
Landlord Studio is fully tax-deductible as a business expense and provides year-end summaries for faster filing.
If your rental is located in a condo or HOA-managed community, the dues are a deductible operating expense.
To claim your rental property deductions, you'll need to file IRS Schedule E. This form is essential for reporting:
Using tools like Landlord Studio can simplify tracking expenses and generating accurate Schedule E reports, ensuring you maximize your tax deductions for rental properties.
Related: A Breakdown of Your Schedule E Expense Categories
Along with HOA fees, are property management fees tax-deductible?
Absolutely. Any fees paid for managing your rental property—including software subscriptions and listing fees—are considered legitimate business expenses. Keeping track of all such expenses is critical to ensuring you do not miss out on valuable rental property deductions.
Moreover, understanding what counts as a business expense versus a capital expense (which must be depreciated) is vital. For instance:
Save weeks of time and hundreds of dollars each year with Landlord Studio. Create your free account today to get started.
According to the IRS, if you actively participate in managing your rental property, you may be eligible to deduct up to $25,000 of expenses each year.
The reason tax write-offs are limited is that rental income is deemed passive (unless you qualify for the Real Estate Professional Status) and is thus subject to passive activity loss limitation rules. As per the IRS Publication 925: Passive Activity and At-Risk Rules, passive losses can only be deducted against passive income and only up to the loss limit defined — $25,000 per year. Losses that exceed this limit, however, can be carried forward into future tax years.
Consider these scenarios:
If your property is used for rental purposes, the IRS considers HOA fees a regular business expense, and as such, the HOA fees are tax-deductible.
There are some exceptions to this rule, however. For example, if the HOA fee is for an assessment for an improvement, this HOA fee is not deductible. Instead, you’ll need to recoup your share of the costs of the improvement via depreciation.
A Homeowners Association (HOA) is a local governing body that sets specific rules and guidelines for the maintenance and presentation of a property in a condominium, gated community, apartment, or another type of planned development. By purchasing the property, you agree to abide by these rules and guidelines and to pay regular HOA fees. These fees are often used to pay for maintenance, landscaping, and general upkeep of the community and common areas.
Determining whether your HOA fees are tax-deductible depends on whether or not you live in the property.
Learn more about how to categorize and track rental property HOA fees here.
Managing a rental property involves numerous expenses, but with a keen understanding of tax deductions for rental property and careful record keeping, you can significantly reduce your taxable income. Taking advantage of these rental property tax deductions can make the difference between a break-even property and a highly profitable investment.
For best results, always:
By leveraging modern property management and accounting software like Landlord Studio and staying informed about the latest tax regulations, you'll be well on your way to maximizing your rental property deductions and boosting your ROI.
Create your free Landlord Studio account today to start streamlining your rental property accounting for a more profitable rental portfolio.
Rental income isn’t just your monthly rent payments. It includes advance rent, lease cancellation fees, tenant-paid expenses, and any non-monetary compensation received in exchange for use of the property. Always report the actual amount you receive—even if it’s not cash—as part of your taxable income.
Rental income is taxed as ordinary income, meaning it’s subject to your personal income tax rate. This rate can vary based on your overall taxable income and filing status. It’s important to consult current IRS tax brackets or a tax professional for your specific situation.
While the rent you receive from tenants is taxable income, you can reduce your overall tax burden by deducting eligible expenses related to managing and maintaining your rental property. In essence, is rent tax-deductible is more about offsetting rental income with rental property deductions such as mortgage interest, repairs, and property management fees.
For active landlords, the IRS generally allows up to $25,000 in rental loss deductions per year if you actively participate in managing the property. Losses beyond this threshold may be carried forward to future years. The specific limits may vary based on your income and involvement, so it’s advisable to check current IRS guidelines.
The IRS tracks rental income through various reporting mechanisms, including Schedule E (Form 1040), where you report all rental earnings and expenses. Additionally, bank statements, 1099 forms, and other financial records help the IRS verify the income declared by landlords.
Taxes on rental income are owed in the year you receive the payment. This includes payments received early or via constructive receipt—when the funds are made available to you, even if you haven’t physically deposited them.
For rental properties, deductible expenses include mortgage interest, property taxes, insurance premiums, repairs, and maintenance. However, if you live in the property part-time, only the rental portion of the expenses (e.g., HOA fees) is deductible. Personal expenses not related to the rental business generally aren’t deductible.
Generally, standard HOA fees for maintenance and management are tax-deductible if the property is rented out. However, special assessments for capital improvements typically aren’t immediately deductible. Instead, these costs are added to your property’s basis and depreciated over time.
Deductible expenses include:
To maximize your return:
If your phone is used solely for managing your rental property, such as coordinating repairs, tenant communications, or scheduling property viewings, you can deduct a portion or the entire expense. If the phone is also used for personal purposes, only the business-use percentage is deductible.
The IRS allows rental property losses to offset other income up to $25,000 per year for active participants. Losses exceeding this limit may be carried forward to subsequent years under passive activity loss rules. It’s essential to understand these limits to plan your tax strategy effectively.
For a property used exclusively as a rental, homeowners' insurance is a deductible expense. However, if you use the property partly for personal use, only the insurance costs attributable to the rental portion can be deducted.
Landlord Studio is an easy to use property management and accounting software designed for landlords.
Find and screen tenants, collect rent online, track income and expenses, run reports, and more - all for free.
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