Once your PRO trial is over you can continue using Landlord Studio GO completely free.
By continuing you agree to our Terms & Conditions.
Please visit our United Kingdom site for a better experience
ContinueSuccessful real estate investors leverage tax deductions and categorize expenses efficiently. Landlord Studio helps automate this process, ensuring accurate tracking and maximizing deductions.
Head of Real Estate Education & Editorial at Landlord Studio
%20(1).png)
Landlord Guide Chapters
What separates successful real estate investors from the rest? From experience working with thousands of landlords, we know the telling sign is how they leverage tax deductions and handle expense categorization.
That's why we at Landlord Studio always advocate for landlords to prioritize the ability to accurately track and categorize expenses. This helps them to maximize their rental property tax deductions and access valuable insights into the financial performance of their rental property.
This guide explores the rental property tax deductions available and the importance of expense categorization. As well as how you can set up a rental accounting system (using tools like Landlord Studio) that aligns with IRS requirements.
Landlords are allowed to deduct many of the expenses related to managing their rental properties from their taxable income. These deductions can significantly reduce your tax liability and enhance ROI.
Common rental property tax deductions include:
Expenses incurred for repairs and maintenance are fully deductible in the year they are paid. This includes costs for fixing plumbing issues, replacing broken appliances, or conducting routine maintenance to keep the property in good condition.
However, it's essential to differentiate between deductible repairs and improvements (which must be capitalized and depreciated over time).
Landlords can deduct expenses related to utilities if they pay for them directly. This includes water, electricity, gas, internet, and trash removal services. If the tenant then reimburses you for these expenses this will need to be reported as income - thus balancing your books.
If tenants pay these bills directly, landlords cannot claim them as deductions.
Property taxes are another significant deduction for rental property owners. Almost every state imposes property taxes on real estate, which can vary widely based on location. Landlords can deduct the total amount paid in property taxes from their taxable income. Keeping track of property tax payments is crucial for maximizing this deduction.
Read more: The Complete Guide To Rental Property Taxes
While you mortgage principal isn’t deductible the interest on your mortgage is.
This deduction can represent a significant deduction, especially in the early years of a mortgage when interest payments are typically higher.
You’ll want to obtain an annual statement from your lender detailing the amount of interest paid during the year to make sure your getting this deduction right at tax time each year.
Landlords can also deduct premiums paid for various types of landlord insurance related to their rental properties, including homeowners insurance, liability insurance, and any additional coverage required by lenders.
Rental property depreciation is a significant tax benefit available to landlords. The IRS allows property owners to depreciate the value of their rental properties over 27.5 years for residential properties. This means you can deduct a portion of the property's value each year as a non-cash expense.
To calculate depreciation, you need to determine the property's basis (usually its purchase price plus any improvements made) and divide that by 27.5 years.
Landlords often incur legal or professional fees related to managing their rental properties. These may include costs for hiring an attorney for lease agreements or eviction proceedings or fees paid to accountants or tax professionals for preparing tax returns related to rental income. These expenses are fully deductible in the year they are incurred.
If you spend money on advertising your rental property—whether through online listings, flyers, or other marketing materials—these costs are also deductible. Keeping detailed records of all advertising expenses will help ensure that you capture this deduction when filing taxes.
For more details on tax deductible expenses and to ensure you’re not overpaying your taxes read our article Rental Property Tax Deductions Checklist.
Proper expense categorization is essential for landlords to streamline tax preparation, maximize deductions, and gain financial insights into their rental properties. Without accurate categorization, expenses can be misreported, leading to missed tax savings or IRS compliance issues.
The IRS allows landlords to deduct various rental-related expenses, including mortgage interest, repairs, maintenance, property management fees, and insurance. By categorizing expenses correctly, landlords can ensure they claim all eligible deductions, reducing taxable income and increasing profitability.
During tax season, organized financial records eliminate the hassle of sorting through receipts and spreadsheets. With expense categorization, landlords can quickly generate tax-ready reports that break down deductible costs, making filing easier and reducing the risk of audits.
Expense tracking isn’t just for taxes—it provides valuable insights into the financial health of a rental portfolio. By categorizing expenses, landlords can analyze operating costs, cash flow, and profitability for each property, helping them make informed investment decisions.
Landlord Studio automates expense tracking by:
Unlike landlord spreadsheets, which are prone to errors and require tedious data entry, Landlord Studio ensures accurate, real-time financial tracking—saving landlords time and money.
The easiest way to set up your rental property accounting, to avoid miscategorizing expenses, and capture every deduction is top use purpose-built software. Below we walk you through the process for getting started.
Start by creating your free Landlord Studio account and adding each or your rental properties. This allows you to track income and expenses for each property and unit separately, giving you a clear financial picture of your entire portfolio. (This step also means that at the end of the tax year you can then run a Schedule E tax report on each of your properties making tax filing super simple.)
You should have a separate bank account for each property. To automate expense tracking, link each of your property related bank accounts to Landlord Studio. The system will import transactions and allow you to categorize them easily, saving you time and reducing manual entry and errors.
You can also now create bank rules to further simplify and streamline your transaction reconciliation.
Landlord Studio offers IRS-compliant expense categories in-line with the Form 1040 Schedule E. But, you can also create custom categories for specific expenses unique to your properties if you need to.
To prevent lost receipts and forgotten transactions:
Finally, Landlord Studio offers a range of comprehensive financial reports that can be filtered by date range, property, owner, income and expense categories, capital expenses and more.
Instantly generate any of these reports and share them with your business partner or CPA when you need to. These tax-ready reports make tax filing easy helping you:
Give your accountant view-only access to your portfolio financials and reports will allow them to ensure you’re maximizing your deductions and offer value-add financial advice and services.
.png)
Successful real estate investors know that meticulous expense tracking and tax optimization are key to maximizing profitability. Without an efficient system, landlords risk missing deductions, overspending on taxes, and struggling with financial management.
That’s where Landlord Studio comes in. Our platform eliminates the hassle of manual spreadsheets and paperwork, providing a fully automated rental accounting solution that ensures every expense is accurately categorized and IRS-compliant.
Landlord Studio is more than just an expense tracker—it’s a complete financial management system designed for landlords. Whether you manage one rental or an entire portfolio, our platform helps you stay organized, compliant, and profitable.
Create a free account with Landlord Studio today to automate your expense categorization and maximize your tax deductions.
