Rental Property Tax Deductions Checklist: Maximizing Landlord Tax Deductions

This rental property tax deductions checklist outlines 21 deductible rental expenses that landlords need to track.

As a landlord, it's important to keep track of every one of your rental property tax deductions. These expenses, which can range from marketing the property to covering legal fees and maintenance costs, can add up quickly and amount to thousands of dollars. 

Tracking these deductible rental expense accurately will allow you identify areas of overspending, opportunities for increasing cash flow, and most importantly reduce your tax liability. But only if you maintain accurate and up-to-date records. 

Our rental property tax deductions checklist highlights 21 landlord tax deductions that every real estate investor needs to be tracking and claiming at the end of the year on their Schedule E form 1040 .

Plus, we explore how you can use software like Landlord Studio for digital record keeping to make tracking theses rental property deductions easy, so you can streamline your rental accounting and ultimately increase your ROI.

Understanding Rental Property Tax Deductions

Rental property owners have a federal obligation to report all income and expenses related to their property. Not doing so might lead to overpayment of taxes or trigger an audit. The IRS allows you to deduct a wide range of expenses, including:

  • Operating Costs: Advertising, insurance, property management fees, and routine maintenance.
  • Financial Expenses: Mortgage interest, property taxes, and utility costs.
  • Depreciation: Recovering the cost of the building (excluding land) over its useful life.

When calculating taxable income, subtract your total deductible expenses from your total rental income. The result is the amount you must report—and by taking full advantage of these deductions, you could significantly reduce your tax burden.

Why Tracking Rental Property Deductions Matters

Every expense—from marketing your property to paying for repairs—can significantly affect your taxable income. Maintaining a detailed rental property deductions checklist not only helps you claim all eligible expenses on your Schedule E but also provides insight into areas where you might be overspending. With accurate records, you can strategically manage your landlord tax deductions and increase your overall cash flow.

  • Reduce Tax Liability: Properly claimed deductions can lower the amount of taxable rental income.
  • Improve Cash Flow: Identify and eliminate unnecessary costs.
  • Stay Audit-Ready: Organized records help protect you in the event of an IRS audit.

How is Rental Income Taxed and How Do Rental Property Tax Deductions Work?

Landlords and real estate investors will need to calculate and declare all of the income collected from their rental properties over the course of the year in their tax return. This obviously includes all of the rents received, but also any other income received from tenants. For example, if as the landlord you are responsible for paying utilities and you are reimbursed by your tenants, you would declare that utility payment as income but then treat the utility payment you made as a deductible expense.

Landlords are responsible for tracking and declaring all of their deductible expenses such as operating expenses, any owner expenses, including things like mileage and as mentioned above, depreciation. To calculate your depreciation, you need to first work out the cost basis of the property minus the land and you can depreciate it over a period of 27.5 years.

To calculate the total amount of taxable income in a given year you need to subtract the sum of all of the expenses detailed in this rental property deductions checklist from the sum of the income received. From this calculation, you’ll get the total amount of income that you need to report on your schedule E.

Rental income is taxed as ordinary income. Meaning if you’re in the 22% marginal tax bracket, you get taxed 22% on that rental income.

The Complete Rental Property Deductions Checklist

Below is an enhanced checklist of 21 essential rental property tax deductions that every landlord should track. This comprehensive guide ensures you don’t miss any deductible rental expenses throughout the year:

1. Advertising & Marketing

The costs associated with advertising your rental to fill your vacancies. These could include costs for rental listing sites such as Zillow, for rent signs, as well as professional photography and video, etc.

If you choose to outsource the finding of new tenants the leasing commission that you pay to an agent to fill your vacant property is also deductible. Generally, these expenses equal about one month’s rent.

Related: How To Advertise Your Property For Rent In 7 Steps

2. Closing Costs

Interest, mortgage points, and real estate taxes can be deducted the year they are incurred. Other real estate closing costs such as recording fees, transfer taxes, and title insurance must be added to the cost basis of the residential property and depreciated over 27.5 years.

3. Education

Expenses for books, webinars, seminars, and courses related to real estate investment or property management is tax-deductible.

4. Depreciation

  • The Building: You can deduct the building’s cost (excluding land) over 27.5 years for residential property.
  • Segmented: New appliances, furniture, or fixtures are depreciated over their IRS-defined useful lives (e.g., 5 years for appliances).

A quick word on depreciation: When you sell your property you will have to pay depreciation recapture on depreciation allowed (even if you didn’t claim it). You can learn more about depreciation recapture on the sale of your rental property here.

5. Dues & Subscriptions

Paid subscriptions to real estate publications and reports and dues to a real estate club are tax-deductible.

6. Home Office

You may be able to take advantage of a home office deduction if you have a home office in which you do work relating to your real estate business. The IRS offers a simplified home office deduction that is easy to calculate and expense from rental property income.

7. Insurance

Landlords should have a quality landlord insurance policy to protect their assets in case of disaster and against potential liability issues. Thankfully, these insurance premiums are fully tax-deductible.

8. Mortgage Interest

While the mortgage principal is not deductible, the interest on the loan is. At the end of each year, the lender will send a statement itemizing annual interest expense to make booking the deduction easier.

Additionally, interest on business credit cards used to purchase services or materials for your rental property business is deductible too!

9. Landscaping & External Maintenance

Any expenses incurred for recurring expenses related to the external property upkeep such as lawn mowing, hedge trimming are fully deductible, as well as one-off seasonal costs like gutter cleaning and snow removal.

10. Licenses & Permits

Sales and tax licenses, local business licenses, and annual fees related to running your business as an LLC (limited liability company) are counted as operating expenses and are deductible.

11. Maintenance & Repairs

Any routine maintenance such as changing the air-conditioning filters as well as regular repairs such as air-conditioning repair, repainting, or plumbing repairs are fully deductible in the year in which they are incurred.

It’s important to note that any more extensive work that adds value to the property may not be immediately deductible, but instead count as capital improvement and will need to be depreciated. Find out more about capital improvements vs repairs.

12. Office Supplies

Legal forms such as lease documents, pens, paper, or other office supplies are tax-deductible.

13. Professional Fees

Professional fees include things like fees for your CPA or tax advisor or fees to an attorney and are deductible.

14. Property Management

Many costs associated with the management of your rental are normally deductible. For example, if you hire a property management company – or if you use a landlord software like Landlord Studio to help with tasks such as tenant communication and rent collection.

15. Property Tax

Property taxes can vary broadly by state and size of the property ranging from a few hundred dollars to several thousand.  Fortunately, these property taxes can be fully deducted from income generated by a rental property.

16. Pass-Through Deduction

The pass-through tax deduction allows qualifying rental property owners to deduct 20% of the rental business income from the overall taxable business income. This can be complicated and it’s advised to seek guidance from a professional tax advisor or CPA.

Learn more about IRS safe harbors.

17. Sales Tax

In some locations and municipalities, there will be a sales or use tax on the rental income that is collected.

18. Phone bills and costs

The use of your phone for your rental business is deductible.

Many rental property owners purchase a cell phone specifically for business use and pay for the monthly service using business credit or debit cards.

19. Tenant Screening

Most landlords get the tenant to pay for the tenant screening report, but not all. Additionally, fees associated with screening an applicant outside of the screening report can also be deducted at the end of the year.

20. Travel

All auto costs associated with traveling to or from your rental or travel undertaken for business purposes such as meeting with a contractor or picking up supplies can be deducted using the standard mileage deduction rate.

For longer distance travel where you are visiting another city or state, the associated travel costs can often also be deducted. However, in order to claim these travel deductions, you will want to keep a careful record of all travel, including distance traveled (if you’re driving) as well as the date and the purpose of the travel. Expenses must also be reasonable.

You can use Landlord Studio’s inbuilt mileage tracker to keep a detailed travel log.

21. Utilities

Landlords that pay for the utilities for their property can include the cost in the tenant’s monthly rent and then deduct the expense of the utilities as an operating expense.

Real Estate Professional Status and Rental Property Tax Deductions

Tax law in the US is incredibly friendly to rental property owners. Most expenses related to the operation and management of your rental property are deductible as an expense against your income.

However, because rental income is generally deemed passive, your real estate losses can only be deducted against your real estate income (under what is known as passive activity loss limits), unless you qualify for Real Estate Professional Status (REPS). Find out more about how to qualify as a real estate professional here.

How To Track Rental Property Tax Deductions

Taking advantage of landlord tax deductions requires landlords to keep up to date and accurate records of all of their expenses throughout the tax year. You not doing so could cost you $1,000’s in overpaid taxes or trigger an IRS audits.

To fully benefit from these deductible rental expenses, consider the following strategies:

  • Keep Detailed Records: Use spreadsheets or digital tools to track every expense. Organized documentation makes filing taxes and defending your deductions much simpler.
  • Utilize Technology: Consider software like Landlord Studio that allows you to connect your bank accounts, digitize receipts, and track expenses in real time.
  • Stay Informed: Tax laws evolve. Regularly update your knowledge on IRS guidelines and deductions for rental property to maximize your benefits.
  • Consult a Professional: A tax advisor can help tailor strategies to your unique situation, ensuring you claim all available landlord tax deductions accurately.

Using a tool like Landlord Studio allows you to scale your business without increasing the time requirements to do so and without becoming overwhelmed by the volume and complexity of your accounting system.

Finally, with this real-time data, you can get nuanced insights into your portfolio financials and develop unique strategies that work for you, allowing you to optimize cash flow profitability and scale your business.

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Common Mistakes to Avoid When Claiming Deductions for Rental Property

Even experienced landlords can fall into pitfalls. Here are a few to watch out for:

  • Inadequate Record Keeping: Missing receipts or poor documentation can result in lost deductions.
  • Mixing Personal and Business Expenses: Keep separate accounts to clearly distinguish deductible rental expenses.
  • Ignoring Depreciation Rules: Ensure you understand which improvements can be expensed immediately versus those that must be depreciated.
  • Overlooking Lesser-Known Deductions: From tenant screening fees to home office deductions, make sure you’re capturing every possible expense.

Related: A Landlord's Guide To Rental Property Bookkeeping

Final Words: Boost Your ROI with Rental Property Tax Deductions

A robust rental property deductions checklist is more than just a list—it’s a strategic tool that can significantly reduce your tax liability while providing clear insights into your property’s financial health. By diligently tracking deductible rental expenses and taking full advantage of available landlord tax deductions, you can optimize your cash flow and improve your overall investment performance.

Implement these best practices and leverage modern property management and accounting tools to ensure that every eligible expense is accounted for. With the right strategy and record keeping, your rental property can operate more efficiently, ultimately leading to increased profitability and long-term success.

Create your free account with Landlord Studio today to streamline your rental property accounting and ensure you never miss rental property tax deductions again.

Rental Property Tax Deductions FAQs

What expenses are not deductible for rental properties?

IRS regulations prohibit deductions for certain expenses, including:

  • Personal expenses: Costs unrelated to rental property, such as food, clothing, or personal travel. If you stay at the rental property for repairs, your personal expenses during the stay are not deductible.
  • Expenses during vacancy: Some costs, like mortgage interest and advertising, may not be deductible if the property isn’t earning rental income. Cash-basis taxpayers also cannot deduct uncollected rent.
  • Cost of travel: Travel from your home to the rental property is generally considered a personal expense. However, travel expenses for property upkeep or management may be deductible.
  • Fines and penalties: Any fines or penalties related to breaking laws, HOA rules, or regulations are not deductible.

Are expenses for condominiums and cooperatives deductible?

Yes, with some limitations:

  • Condominiums: Expenses like depreciation, repairs, mortgage interest, and taxes related to common areas are deductible. However, capital improvements (e.g., new clubhouse amenities) must be depreciated rather than deducted.
  • Cooperatives: Maintenance fees paid to the cooperative housing corporation are deductible, but capital improvements are not. Instead, these costs are added to your stock’s cost basis, reducing taxable capital gains when selling.

How should I keep records for rental property deductions?

The IRS requires supporting documentation for deductions, which you must keep for at least 3 years. You should keep records such as:

  • Receipts and invoices for repairs and maintenance
  • Logs or calendars documenting property management activities
  • Bank statements and financial records related to rental income and expenses

Where do I report rental income on my tax return?

Rental income, expenses, and depreciation should be reported on Schedule E of Form 1040 or 1040-SR. If you own more than three rental properties, you must use multiple copies of Schedule E.

What deductions can I claim for my rental property?

Rental property owners can deduct:

  • Qualified rental expenses: Mortgage interest, property taxes, insurance, utilities, and property management fees.
  • Operating expenses: Advertising, maintenance, and legal fees.
  • Repairs: Necessary repairs to maintain the property’s condition.
  • Depreciation: The cost of purchasing and improving the property is deducted over its useful life (typically 27.5 years for residential properties).

Additionally, some landlords may qualify for the Qualified Business Income (QBI) deduction, allowing them to deduct 20% of their rental income if the property qualifies as a trade or business under Section 162 of the Internal Revenue Code.

What is a 1031 Exchange, and how does it help with taxes?

A 1031 exchange allows real estate investors to defer capital gains and depreciation recapture taxes by swapping one investment property for another. The IRS requires that exchanged properties be “like-kind”, meaning they must be of the same nature or character, even if they differ in quality or grade.

Is rental income taxed as ordinary income?

Yes, rental income is generally taxed as ordinary income if you rent the property for more than 14 days per year. If you rent it out for 14 days or fewer, you are not required to report the income or pay taxes on it.

For further details, refer to IRS Topic No. 415: Renting Residential and Vacation Property.

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