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Being a landlord can help you build wealth, but it’s also a lot of work. You must find tenants, secure insurance, handle a mortgage and pay property taxes. Renting a home can also complicate your personal tax situation. Luckily, the government allows you to deduct certain expenses associated with running a rental property. The IRS stipulates that deductible expenses must be ordinary and generally accepted in the rental business and necessary for managing and maintaining the property.
Work with a financial advisor who can help manage the tax and financial impact of your real estate holdings.
Top Rental Property Tax Deductions
As a rental property owner, you can deduct several expenses from your income taxes to lower your tax liability and improve your overall operation. These expenses relate to several business activities, including not only buying a rental property but also operating and maintaining it.
These are the most common rental property tax deductions.
1. Mortgage Interest
Most homeowners use a mortgage to purchase their rental properties. These landlords with a mortgage often find that loan interest is their largest deductible expense.
However, you cannot deduct the portion of your mortgage payment that goes toward the principal. Instead, the deduction only applies to payments toward interest charges. The interest you pay throughout the year is reported to you via Form 1098. 1
In addition to mortgage interest, you may be able to deduct:
- Origination fees
- Mortgage points used to purchase or refinance your rental property
- Interest on unsecured loans used for improvements
- Credit card interest for purchases related to your rental property
Come tax time, you must have already spent money on these purchases to qualify.
It can be tricky to determine what counts and how to file these extraneous interest charges. Consider consulting an accountant or financial advisor to help.
2. Property Taxes
Almost every state and local government collects property taxes. Depending on your city and state, your tax burden can range from a few hundred dollars to hundreds of thousands of dollars.
You can find the exact tax rate for your area by checking your escrow summary or inquiring with a tax professional. If your state has rental licensing requirements, you can also deduct any accompanying landlord or vacation rental license fees.
If you manage short-term rentals, your locale may charge a kind of fee known as an occupancy tax. However, you can deduct these taxes.
Also deductible are inspection fees or sales tax on business-related items, wages and Social Security taxes for employees.
Because property taxes and related fees can significantly affect a rental property’s profitability, estimating the overall tax impact can help you better understand your net income. Use our income tax calculator to see how deductions and rental income may influence your total tax liability:
3. Travel and Transportation Expenses
If you’re a landlord who travels to your properties, your transportation expenses may be deductible. This includes expenses for showing your rental property or collecting rental income throughout the year.
There are two methods for deducting business use of your personal vehicle:
- Actual expenses
- Standard mileage rate.
For 2026, the standard mileage rate for business use was 72.5 cents per mile. 2
4. Real Estate Depreciation
Wear, tear and obsolescence lower the value of your rental property and its contents over time. This process, known as depreciation, is tax-deductible.
You can claim depreciation as soon as your home or apartment is available for rent, even if you don’t have any tenants yet. The deduction must be spread out over the useful life of the property, which is 27.5 years for residential rental properties according to the IRS. 3 Keep in mind, though, that the value of the structure can depreciate, but not the value of the land.
You can also claim the value of equipment that helps you run your rental business, like your computer or automobile, as well as home improvements you make to the property that add value, adapt its use or extend its life. This could include installing a new roof, adding furniture or updating the household appliances.
Per IRS Publication 946, when calculating a deductible expense, it must: 4
- Be expected to last for more than a year
- Be valuable to your rental business
- Lose value over time
5. Maintenance and Repairs
While major home improvements are deductible via depreciation, the tax code allows you to deduct certain repair and maintenance costs separately. The big difference is that these efforts keep your property in rentable condition, but they do not add significant value.
According to IRS Publication 527, 5 several types of improvements qualify.
- Additions (bedrooms, bathrooms, decks, garages, patios, porches)
- Major landscaping (adding a pool or a fence)
- Heating and air conditioning
- Plumbing
- Insulation
- Interior upgrades (kitchen, built-in appliances, wall-to-wall carpeting)
- Miscellaneous upgrades (roofing, storm windows, security systems, wiring)
If you hire someone else to do the work, you can deduct the labor costs. The same goes for property or on-site managers, should you choose to hire one.
If you take the DIY approach, you can deduct any rental fees for tools and equipment.
6. Utilities
Every landlord handles utilities differently. However, you can deduct any of these utilities that you cover.
- Gas
- Electricity
- Water
- Heating and AC
- Internet
- Cable
- Satellite
Even if your tenant agrees to reimburse you for utilities later, you can still file the rental property deduction. You must treat the reimbursement as income.
7. Legal and Professional Fees
Landlords can deduct certain professional fees from the rental property income.
- If you use a CPA or computer software to prepare your tax return, be sure to deduct the cost.
- If you hire a lawyer to oversee rental paperwork at any point in the year, deduct those exorbitant hourly fees.
- If you used a real estate agent to find your tenants, deduct the commission.
- If you advertised the property in the newspaper, over the radio or online, deduct those ad dollars.
- You can write off advisor services so long as you meet to discuss the rental property.
- If you have to evict someone, this deduction would help cover the legal and court filing fees.
These are all considered operating expenses and should be deducted as such.
You cannot, however, deduct legal fees incurred to defend the title to your property or to recover and improve the property.
8. Insurance Premiums
Lenders can require homeowners to obtain an insurance policy before securing their mortgage. Luckily, any form of insurance is considered an ordinary and necessary expense for rental property and is thus deductible. The deduction applies to basic homeowners insurance, as well as special peril and liability insurance.
If you have employees, you can deduct the cost of their health and workers’ compensation insurance, too. Although insurance premiums tend to be a bit higher for rentals, this boost can help offset the higher cost.
Landlords can also deduct unreimbursed losses, including those caused by hurricanes, earthquakes, floods or theft.
9. Office Supplies
If you manage rental properties, you may deduct the cost of office supplies used exclusively for that purpose. This can include items like a printer, computer software or office materials necessary for managing your rentals.
If you maintain a dedicated home office that you regularly and exclusively use for rental activities, you may also qualify for the home office deduction. Be aware that this deduction has specific IRS requirements, and personal use of space or supplies can disqualify part of the expense.
Keep detailed records of your purchases and the time spent managing your properties. Deductions related to mixed-use items or home office claims are often subject to IRS scrutiny, so accurate documentation is important.
10. Property Management Fees
If you hire a property manager to handle the day-to-day responsibilities of your rental, those fees are generally tax-deductible.
This can include several services.
- Marketing your property
- Screening tenants
- Collecting rent
- Coordinating repairs
Because these expenses directly relate to operating and maintaining your rental business, the IRS allows landlords to deduct them as ordinary and necessary business costs.
Working with a property manager can be especially valuable if you own multiple rentals, live far from the property or simply prefer a hands-off approach. While these services come at a cost, the ability to deduct these fees can help offset the expense and make professional management more affordable.
If you’re unsure how to document or categorize these deductions, a tax professional or financial advisor can help ensure you capture all eligible costs while remaining compliant with IRS rules.
How to Claim Rental Property Tax Deductions
In general, you report rental income and deduct rental expenses in the same year they are paid or incurred, using IRS Schedule E (Form 1040). 6 To simplify the process and substantiate your claims in the event of an audit, keep accurate, organized records of all rental income and expenses throughout the year.
If you use the rental property for personal purposes during the year, the deduction rules become more complex. You must allocate expenses between personal and rental use.
IRS rules limit the number of days a property can be used personally before it is considered a personal residence. This is typically no more than 14 days or 10% of total rental days. With these rules, you are limited in what deductions you can claim on Schedule E.
Personal use expenses generally cannot be deducted on Schedule E. However, certain expenses, such as mortgage interest or property taxes, may be deductible on Schedule A if you itemize deductions.
Tax Tips for Landlords
Understanding how rental property taxes work can help you keep more of your earnings and avoid costly mistakes.
Track Every Rental Expense
Keep detailed records of all expenses, from repairs and utilities to advertising and travel. This will make tax time much easier and help ensure you don’t miss valuable deductions.
The IRS requires clear documentation, so saving receipts and maintaining organized records throughout the year can protect you in case of an audit.
Depreciate Your Property Correctly
Residential rental properties can be depreciated over 27.5 years, allowing you to deduct a portion of the home’s value each year. This non-cash deduction can significantly reduce your taxable income.
However, it’s important to calculate it accurately and understand how depreciation recapture works when you eventually sell.
Keep Personal and Rental Finances Separate
Using a separate bank account for your rental property simplifies bookkeeping and creates a clear record of rental income and expenses. This separation also makes it easier to track cash flow, support your tax filings and demonstrate that you’re operating the property as a business.
These tax strategies can help you stay organized and maximize deductions while keeping your rental operations running smoothly. A financial advisor or tax professional can help you create a plan that aligns with your rental goals.
Tax Planning Advisor Services for Rental Property Owners
Rental property tax rules involve enough moving parts - depreciation schedules, deduction categories and mixed-use limitations - that professional guidance often pays for itself well beyond the cost of the service.
Calculating and Tracking Depreciation Correctly
Correctly calculating the actual depreciation and planning for what happens at sale require a level of precision that only an advisor can provide.
A tax advisor can:
- Help accurately separate land value from structure value.
- Apply IRS Publication 946 rules to equipment and improvements with different depreciation schedules.
- Prepare you for depreciation recapture tax when you eventually sell the property.
Example
A landlord who bought a duplex for $400,000 may work with an advisor to determine the correct land-to-structure allocation using a professional appraisal or tax assessment, rather than guessing.
This is important because even a small miscalculation compounds across 27.5 years of depreciation deductions.
Navigating Personal-Use Limits on a Rental Property
Using a rental property personally can change how deductions work, but sorting exactly how to allocate expenses between personal and rental use gets complicated quickly.
An advisor can:
- Help calculate the correct personal-versus-rental allocation percentage for mixed-use expenses.
- Determine which costs should move to Schedule A rather than Schedule E.
- Ensure the property doesn’t accidentally cross the threshold that would reclassify it as a personal residence.
Example
A landlord who spends three weeks a year at their beach rental might work with an advisor to confirm they’re still under the personal-use threshold. If not, an advisor can help explain exactly how this affects their ability to deduct expenses such as mortgage interest and property taxes.
Structuring Multiple Rental Properties for Tax Efficiency
Landlords with more than one property often face more complex decisions about how income, losses and deductions interact across their portfolio.
An advisor can:
- Help evaluate whether grouping properties for passive activity loss purposes makes sense.
- Plan around passive loss limitations if your income is high enough to trigger them.
- Coordinate deductions across properties to minimize your overall tax liability.
Example
An investor with three rental properties, one generating a loss and two generating income, might work with an advisor to understand how passive activity loss rules allow or restrict using that loss to offset the income from the other two properties.
Planning for Depreciation Recapture Before You Sell
There is an additional tax consequence at play when you eventually sell the property. It is a detail many landlords are often unprepared for.
An advisor can:
- Estimate your depreciation recapture tax liability ahead of a planned sale.
- Explore whether a 1031 exchange could defer that tax by rolling proceeds into another property.
- Help you decide whether selling now or holding longer makes more financial sense.
Example
A landlord plans to sell a rental property they’ve owned for 15 years. They learn from an advisor that a significant portion of their sale proceeds will be taxed as depreciation recapture.
This prompts them to consider a 1031 exchange rather than a straightforward sale.
Bottom Line
You can deduct several expenses related to operating your rental property as a business. From the cost of maintaining the yard and repairing the property between tenants to your mortgage interest, you can use these deductions to cut down your total tax bill. The important thing is to keep meticulous records of all your operational activities so that you can properly claim the correct expenses and amounts at the end of the year.
Tax Planning Tips
- If your financial situation is complex, or you’re unsure how much you’ll owe in taxes, a financial advisor can help you calculate your liability and avoid costly mistakes. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Being able to create a specific budget is a skill that not many people have. However, a budget is the best way to ensure that you never fall into hard financial times. Budgets can be useful if you’re looking to save up for a vacation or another expensive venture as well. SmartAsset’s budget calculator makes it extremely easy to get a plan ready to go.
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