Tax Deductions All Landlords Should Know

Managing rental properties is a lucrative opportunity, but it comes with its unique set of financial and operational challenges. Among these is understanding and utilizing the various tax deductions for rental property available to landlords.

From maintenance costs to software fees, knowing what qualifies as deductible rental expenses can significantly reduce your taxable income and improve your bottom line. When you report rental income on your tax return each year, you can deduct the cost of certain expenses. For the most part, if you have ordinary and necessary expenses for your residential rental property (aka operating expenses), they will likely be deductible.

This article will be a comprehensive overview of the most common deductions for rental property owners, explaining how to organize your rental income and expenses to maximize your real estate savings while remaining compliant with IRS regulations.

#1 Repairs and Maintenance

Handling repairs and maintenance is a key part of managing rental properties, and the landlord tax deductions for these expenses can significantly reduce your tax burden. The IRS allows you to deduct repair costs that keep your property in good working condition without increasing its value or extending its life. Examples of deductible repairs include fixing leaks, repainting walls, repairing appliances, and routine maintenance tasks like HVAC servicing or gutter cleaning. Unlike improvements, which must be capitalized and depreciated, repair and maintenance expenses can be deducted in the year they occur.

To claim this deduction, report eligible expenses on Schedule E (Form 1040). Keep thorough documentation, including receipts and invoices, to substantiate your claims. For mixed-use properties, only deduct the portion of expenses tied to rental use. Using tools like Ledgre can simplify tracking and organizing these costs, ensuring accurate reporting and compliance with IRS guidelines.

It’s important to differentiate repairs from improvements. Repairs are typically smaller, one-time fixes to maintain the property’s condition, while improvements tend to be larger projects that add value to the property, like installing a new roof or upgrading a kitchen. When you deduct expenses, you should not include improvements — those must be capitalized or depreciated. Understanding this distinction helps you avoid misclassifications that could trigger IRS scrutiny or reduce your eligible deductions.

#2 Mortgage Interest

The mortgage interest deduction is a valuable tax benefit that allows landlords to reduce their taxable income by deducting interest paid on loans used to buy, build, or improve rental properties. This deduction applies exclusively to the interest portion of the loan payments, not the principal, and can also include interest from refinanced loans or funds used for property improvements.

To qualify, the loan must be tied to a property used for rental purposes. If a property is partially used for personal purposes, only the interest related to the rental portion can be deducted. Landlords must maintain detailed records, such as loan agreements and mortgage statements, to substantiate their claims. The IRS does not impose a limit on deductible mortgage interest for rental properties, making it a powerful tool for offsetting significant business expenses.

Claiming the deduction involves reporting the interest on Schedule E (Form 1040) under the “Expenses” section. By doing so, landlords can significantly reduce their taxable income, improving cash flow and profitability. For instance, paying $12,000 in annual mortgage interest and falling into the 24% tax bracket can reduce your tax liability by $2,880. Accurate reporting and compliance with IRS guidelines ensure landlords can maximize this benefit while managing their rental property effectively.

#3 Personal Property Taxes

The property tax deduction is a valuable tool for landlords, allowing you to reduce your taxable income by writing off taxes paid on your rental properties. This deduction applies to taxes assessed on real property (like land and buildings) and personal property used for rental purposes (such as vehicles, appliances, or business equipment). These taxes are usually based on the fair market value of the property. Unlike personal-use properties, rental property taxes are not subject to the $10,000 State and Local Tax (SALT) deduction cap, making them fully deductible for business purposes.

To qualify, property taxes must be directly tied to rental use. For multi-purpose properties, you can only deduct the portion of taxes associated with rental activity. For example, if a second home is rented 75% of the year, only 75% of the property taxes are deductible. You must also maintain accurate records, including property tax bills and payment receipts, to substantiate your claims and ensure compliance with IRS rules.

Claiming this deduction involves reporting it on Schedule E (Form 1040) under the “Taxes” section. For personal property used in your rental business, such as a vehicle, taxes can be listed under “Other Expenses.” Properly itemizing and separating expenses related to personal and business use is essential to avoid errors and potential penalties during an audit.

The savings from this deduction can be significant. For instance, if you pay $5,000 annually in property taxes on a rental property and fall into the 24% tax bracket, your deduction will reduce your tax liability by $1,200. By lowering your taxable income, this deduction improves your cash flow, making it easier to reinvest in your property or expand your rental portfolio.

By understanding the rules for property tax deductions, accurately tracking expenses, and reporting them properly, you can maximize your tax savings and enhance your property’s profitability.

#4 Landlord Insurance

Landlord insurance is an essential expense for property owners, providing coverage for buildings, personal property, unattached structures, and lost rental income in the event of disasters, theft, or other damages. While premiums for landlord insurance can range from $600 to $2,000 annually, they are considered tax deductions for rental property, allowing you to recoup a portion of this cost come tax season.

To qualify for the deduction, you must have an active landlord insurance policy for a property that is rented or available for rent during the tax year. For those renting out part of their home or renting seasonally, a portion of your homeowners' insurance may be deductible. This fraction should be calculated based on the rental period or area of the home used for rental purposes.

When claiming the deduction, report the total premiums on Schedule E (Form 1040) under the “Insurance” line. If you’ve prepaid for multi-year coverage, only deduct the portion applicable to the current tax year. For instance, if you pay $5,000 upfront for five years of coverage, you can only deduct $1,000 per year.

By deducting landlord insurance premiums, you reduce your rental property taxable income, improving cash flow and reinforcing the financial viability of your rental property business. Alongside other deductions like repairs and mortgage interest, this tax benefit is a straightforward way to optimize your rental property’s profitability.

#5 Depreciation

Depreciation is one of the most valuable rental property tax deductions available to property owners, offering a way to recover the cost of wear and tear on your property over time. By allowing you to deduct a portion of your property’s value annually, depreciation reduces taxable income, improving cash flow and profitability. For example, if you generate $20,000 in rental income but deduct $10,000 in depreciation, your taxable income decreases to $10,000.

To qualify, the property must be used for rental purposes and meet IRS criteria, including being actively rented or available for rent. Depreciation begins when the property is placed in service and stops when sold or withdrawn. Only the building’s value, not the land, is depreciable. For instance, if you purchase a rental property for $400,000, with $100,000 allocated to land, only the remaining $300,000 is depreciable over 27.5 years under the IRS’s Modified Accelerated Cost Recovery System (MACRS). This equals an annual deduction of approximately $10,909.

Depreciation is reported on Schedule E (Form 1040), ensuring your deduction is correctly applied to offset rental income. For properties with multiple assets, Form 4562 may also be required to track depreciation calculations. Keeping detailed records of purchase prices, allocations, and improvements is essential for compliance and audit protection.

By incorporating depreciation into your tax strategy, you can save thousands annually. For example, a $10,909 deduction in the 24% tax bracket reduces your tax liability by $2,618, freeing up funds for maintenance or investments. Landlord tax deductions like depreciation are indispensable tools for long-term financial success, making rental property ownership more profitable and sustainable.

#6 Employee and Contractor Wages

Managing rental properties often involves hiring help for tasks like maintenance, repairs, tenant management, and cleaning. These wages and fees are considered landlord tax deductions, offering a valuable way to reduce taxable income. Payments made to employees and contractors qualify as business expenses, provided they are directly tied to rental property management.

Qualifying expenses include wages paid to property managers, contractors for repairs, and recurring services like landscaping or cleaning. However, payments for personal services or improvements that increase property value, such as renovations, do not qualify. For example, if you hire a contractor for $5,000 in repairs and pay a property manager $12,000 annually, the total $17,000 is deductible, helping offset your rental business costs.

To claim this deduction, report wages on Schedule E (Form 1040) under “Wages” or “Other Expenses.” Maintain proper documentation, including contracts, invoices, and proof of payment. For contractors paid over $600 annually, you must issue a Form 1099-NEC. Accurate reporting ensures you meet IRS requirements while maximizing your deductions.

If you pay $20,000 in wages and fall into the 24% tax bracket, this deduction could save you $4,800, significantly improving your cash flow. By leveraging the rental property management tax deduction, you can reduce your tax liability and make property ownership more financially sustainable.

#7 Local Travel Expenses

Managing rental properties often requires frequent local travel, from visiting properties to meeting contractors or purchasing supplies. The IRS offers a rental property tax deduction for business-related travel, allowing landlords to offset the costs of vehicle use or public transportation. Qualifying expenses include mileage for property visits, trips to purchase supplies, or attending property-related meetings. However, personal travel and commutes to your first rental property do not qualify.

You can calculate your deduction using the standard mileage rate (70 cents per mile in 2025) or the actual expense method. For example, if you drive 2,000 miles for property management tasks in 2025, your deduction using the standard mileage rate would be $1,400. Keeping detailed records, such as mileage logs and receipts for tolls or parking fees, is essential for supporting your deduction and ensuring compliance with IRS rules.

To claim this deduction, report it on Schedule E (Form 1040) under the “Auto and Travel” or “Other Expenses” sections. Properly itemizing travel costs, such as parking fees or public transportation, ensures you maximize your deductions. By deducting local travel expenses, you can lower your taxable income, improve cash flow, and reduce the overall cost of managing your rental properties.

#8 Long Distance Travel Expenses

Managing rental properties often requires long-distance travel, whether to inspect properties, attend conferences, or meet with contractors and tenants. The IRS allows landlords to deduct certain long-distance travel expenses, provided they are business-related, ordinary, and necessary. Qualifying expenses include the following:

• transportation (airfare, car rentals, mileage for personal vehicles)
• lodging
• meals (50% deductible)
• other related costs like laundry or internet use during the trip

To qualify as long-distance travel, the trip must take you away from your tax home, which is the primary area where you conduct business, for a period requiring rest or sleep. This ensures the trip is substantial enough to justify expenses. Personal travel or lavish expenses, such as high-end dining or luxury accommodations, do not qualify and should not be included.

Landlords typically report these expenses on Schedule E (Form 1040), under “Auto and Travel” or “Other Expenses,” depending on the type of expense. Detailed records, including receipts, travel itineraries, and a log of business activities, are essential for substantiating your deductions.

The potential savings are significant. For example, a landlord spending $5,000 annually on qualifying long-distance travel could reduce their taxable income by the full amount, translating into substantial tax savings, depending on their tax bracket. By properly tracking and reporting these expenses, you can offset the costs of managing rental properties while staying compliant with IRS regulations.

#9 Eviction Legal Fees

Evictions are often an unavoidable and costly part of managing rental properties. However, the IRS allows tax deductions for rental property owners to offset many eviction-related expenses, such as attorney fees, court filing costs, and process server charges. These costs are considered necessary business expenses, as they directly relate to maintaining rental income and managing your property effectively.

To qualify for the deduction, legal fees must pertain solely to rental business activities. For example, if you spent $2,000 on attorney fees to evict a tenant for unpaid rent, these costs would be fully deductible. However, fees related to personal disputes or property improvements do not qualify. Landlords must keep detailed records, including invoices and receipts, to substantiate their claims and avoid issues during an audit.

Claiming these expenses is straightforward. Report them on Schedule E (Form 1040) under “Other Expenses,” “specifying “Legal Fees.” This ensures proper documentation and allows you to deduct the full amount incurred. For example, if your total legal fees are $2,500 and you’re in the 24% tax bracket, this deduction would save you $600 on your tax bill. By reducing taxable income, these deductions improve cash flow and help offset the financial burden of the eviction process.

Accurate record-keeping and adherence to IRS rules ensure compliance and maximize your savings. Deducting eviction legal fees is a valuable strategy for mitigating the costs associated with maintaining your rental property business.

#10 Home Office

Managing rental properties requires organization and administrative work, often done from home. The tax deductions on rental property for a home office provide landlords with a valuable opportunity to offset these costs. If you use a dedicated space in your home exclusively for rental-related tasks, like tenant communication, financial management, or maintenance scheduling, you may qualify for this deduction.

The home office deduction allows you to write off expenses tied to this space, such as a portion of your utilities, mortgage interest, property taxes, and maintenance costs. The IRS offers two methods to calculate this deduction: the simplified method, which provides a flat rate of $5 per square foot up to 300 square feet, or the actual-expense method, which allocates a percentage of your total home expenses based on the office’s size relative to the house. For instance, if your home office occupies 10% of your home and your total qualifying expenses are $10,000, you can deduct $1,000.

To claim this deduction, you must meet the IRS’s exclusive-use requirement, meaning the space must be used solely for your rental business. Expenses are reported on Schedule E (Form 1040), and if using the regular method, additional documentation may be required through Form 8829. Maintaining detailed records of expenses and photos of your office space can help you substantiate your claims in the event of an audit.

By utilizing the home office deduction, landlords can reduce taxable income, improve cash flow, and make managing rental properties more affordable. Proper documentation and adherence to IRS guidelines ensure you maximize this benefit while staying compliant with tax laws.

#11 Meals and Entertainment Costs

The meals and entertainment deduction is a straightforward yet often misunderstood benefit. This deduction allows you to write off 50% of qualifying business-related meal expenses, helping reduce your taxable income and improve your bottom line.

To qualify, meals must meet IRS guidelines: they must involve business discussions, not be “lavish or extravagant,” and must be purchased from restaurants rather than grocery stores. For example, taking a potential business partner to dinner to discuss an investment opportunity qualifies, while a meal during personal errands does not. Entertainment expenses, such as tickets to events, rarely qualify unless they are directly tied to business and separated from meal costs.

When claiming this deduction, meticulous record-keeping is essential. Save itemized receipts, note who attended, and document the purpose of each meal. This is particularly critical if you are audited. Meals during business travel are also deductible at 50%, and you may use a standard meal allowance for simplicity.

You’ll report these deductions on Schedule E (Form 1040) under “Auto and travel” or “Other,” depending on the expense classification. Larger rental businesses may need to file under Schedule C instead. Staying organized with a dedicated meal ledger can simplify tax filing and ensure compliance with IRS rules.

By deducting half of your eligible meal expenses, you can save a significant amount each year. With no cap on deductions if the expenses qualify, this benefit is an effective way to manage costs while enjoying a meal that supports your business goals. Proper planning ensures you make the most of this valuable deduction.

#12 Start-Up Expenses

Starting a rental property business often involves significant upfront costs, from advertising and permits to office supplies and website creation. Thankfully, many of these expenses qualify for rental property tax deductions, helping you recoup some of the money spent before officially opening your doors.

The IRS allows landlords to deduct up to $5,000 in start-up expenses during the first year of operation. Any remaining expenses under $50,000 can be amortized over 15 years, spreading the savings. For instance, if you spend $30,000 in start-up costs, you can deduct $5,000 in the first year and $25,000 over the next 15 years, saving $1,667 annually in addition to the initial deduction.

To qualify, start-up expenses must be ordinary, necessary, directly related to rental activity, and incurred before the first day of operation. Examples include advertising, office supplies, and training costs. However, capital improvements, property purchases, and travel expenses are excluded. Keeping detailed records, such as receipts and invoices, is crucial to substantiate your claims.

To claim the deduction, report the $5,000 on Schedule E under “Other” and use Form 4562 for amortized amounts exceeding the initial limit. If your total costs exceed $50,000, the deduction is reduced dollar-for-dollar above this threshold, meaning totals over $55,000 may not qualify.

Taking advantage of this deduction can save you thousands of dollars annually and improve your cash flow as you establish your rental property business. Careful planning and accurate reporting are key to maximizing your savings while staying compliant with IRS rules.

#13 Miscellaneous Tax Deductions for Short Term Rentals

Short-term rental property owners, such as those managing Airbnbs or vacation homes, can benefit significantly from various rental property tax deductions. These deductions help offset operational costs and improve profitability. Key deductible expenses include maintenance and repairs, operating costs, utilities, property taxes, and mortgage interest. For example, you can deduct cleaning services, advertising costs, and insurance premiums. However, if a property is used for both personal and rental purposes, you must carefully allocate expenses based on the number of days used for each.

Additional deductions include software fees, licenses, and permits needed for running your rental business. Improvements, while deductible, are treated as capital expenses and depreciated over time. To maximize savings, it’s crucial to keep detailed records of receipts, invoices, and financial transactions. By leveraging these tax breaks and understanding local regulations, short-term rental owners can reduce taxable income and optimize their business finances.

Maximizing Your Savings With Tax Deductions

By carefully documenting your expenses, keeping personal and business finances separate, and understanding which deductions apply, you can reduce your tax burden and keep more of your hard-earned income. Whether it's advertising costs, software fees, or cleaning expenses, every eligible deduction contributes to your rental property’s profitability. Partnering with a tax professional or using rental property software ensures compliance and helps you maximize these valuable tax benefits.

Disclaimer: Ledgre does not provide tax or legal advice. All information and materials available on this site are for general informational purposes only. Contact a tax professional for advice with respect to a specific tax matter.