5 Prospective Tax Deductions for Landlords

As a landlord, every dollar counts—and so does every deduction. Whether you own a single rental property or manage a growing portfolio, understanding which expenses are tax-deductible can significantly impact your bottom line. The IRS allows landlords to deduct various costs related to owning and operating rental properties, but many miss out simply because they aren’t aware of what qualifies. This post covers 5 prospective tax deductions you should know about and 3 common things that can’t be written off on taxes, helping you confidently make the most of your investment and head into tax season.

5 Tax Deductions for Rental Property

Here are 5 common tax deductions for landlords:

1. Mortgage Interest

If you didn’t buy your rental property fully upfront, you most likely have a mortgage. Unfortunately, mortgage expenses like commissions and appraisal fees aren’t tax-deductible for landlords. These costs are added to your property basis. However, you can deduct interest on up to $750,000, or $1 million if you took out the mortgage before December 16, 2017, of secured mortgage debt on your first or second house. For rental or investment properties, mortgage interest is not treated the same way as for personal homes. It is typically deductible as a business expense on Schedule E, reducing your taxable rental income.

Here’s How to Report Mortgage Interest on Your Taxes:

1. The mortgage lender sends you an IRS Form 198, showing how much mortgage interest you paid that year.
2. Suppose your monthly mortgage payment includes money set aside for property taxes and homeowners’ insurance (called an escrow account). In that case, your mortgage company may also give you a breakdown of those amounts, though only the interest is on the official IRS Form 1098.
3. If the property is a rental or investment property, you report the mortgage interest as a business expense on Schedule E, which is used for reporting rental income and expenses.

2. Rental Property Depreciation

Depreciation is a standard tax deduction for landlords that can be taken for properties that meet the following criteria set by the IRS:

• You own the property.
• The property is expected to have a “useful life,” meaning it will wear out, decay, become obsolete, or lose value due to natural causes.
• You expect the property to last for over one year.
• The property is used for business or income-producing purposes.
• The property isn’t placed in service and later disposed of, or not used for business purposes, during the same year.

The IRS doesn’t count land as depreciable since it never gets used up. Similarly, they don’t allow you to depreciate planting or landscaping costs since those are considered part of the cost of land, not the property.

The cost of qualifying properties is deducted in small amounts over a certain number of years. Residential properties placed in service after 1986 are depreciated using the Modified Accelerated Cost Recovery System (MACRS). This system states that properties typically depreciate over 27.5 years, which the IRS calls an investment property’s “useful life.”

Using this method, you can deduct approximately 1/27.5 of your rental property’s value annually.

• For example:

If you purchase a rental property for $275,000 (not including the value of the land, which can’t be depreciated), you divide that amount by 27.5 years:

$275,000 ÷ 27.5 = $10,000

You can deduct $10,000 per year in depreciation as a business expense.

How to Claim This Deduction: Use Form 4562 to calculate depreciation and report the amount on Schedule E of your tax return. It’s important to note that while depreciation can save you money now, the IRS may require you to give some of it back down the road. If you depreciate property and later sell it for more than its adjusted basis (original cost minus depreciation), the IRS may charge you a 25% depreciation recapture tax—even if you never actually claimed the depreciation.

Because of this, it’s wise to work with a tax professional to plan ahead and understand the long-term implications. When used strategically, depreciation can be a powerful tool for reducing your taxable income and maximizing your return on investment.

3. Repairs

Many landlords assume they can write off any expense related to their property on their taxes. However, according to the IRS, that’s not the case. For landlords, it’s essential to know the difference between repairs and improvements when filing taxes:

A repair ensures your property stays in good condition and is tax-deductible in the year you pay for it. Repairs don’t typically add significant value to your property or prolong its life. Examples of repairs can include patching a roof leak, repairing an HVAC unit, replacing broken windows, or fixing a leaky faucet.

An improvement adds substantial value to your investment property and isn’t tax-deductible when you pay for it. You can recover the cost of an improvement by depreciating the expense over your property’s useful life. These could include a new garage or roof, adding a deck, renovating a kitchen, or upgrading the electrical system.

Read our blog about deducting repairs on your rental property to learn what qualifies, what doesn’t, and how to file these expenses correctly on your taxes.

4. Travel Expenses

If you’re a long-distance landlord, you’ll most likely have to travel to conduct inspections, check in on tenants, collect rent, and ensure your investment is properly cared for. The good news? Travel expenses related to managing your rental can often be written off as tax deductions. If your trip was to conduct improvements on your property, you have to recover that expense as part of the improvement.

How to Claim Travel Expenses as a Tax Deduction: To claim these deductions, keep detailed records and receipts, and report the expenses on Schedule E of your tax return. For vehicle mileage, use a mileage log or app to track distances driven specifically for rental-related purposes. The standard mileage rate for business use in 2025 is $0.70 per mile. It was $0.67 in 2024.

5. Property Taxes

One of the most straightforward tax deductions for landlords is property taxes. As a rental property owner, you can typically deduct the full amount of property taxes you pay to local or state governments on your rental property, without any cap.

• This is a significant advantage over personal residences, where homeowners can only deduct up to $10,000 ($5,000 if married filing separately) for a combination of property taxes and either state/local income taxes or sales taxes. The Tax Cuts and Jobs Act introduced this limit, known as the SALT cap.

However, this limit doesn’t apply to business activities like rental property ownership. If you actively manage your rental, you may be able to deduct the entire amount of property taxes as a business expense on Schedule E—reducing your taxable rental income.

Be sure to keep accurate records of your property tax bills and payment confirmations in case the IRS ever asks for documentation.

6. Other Common Expenses

In addition to these standard deductions, landlords can also write off various other expenses related to operating and maintaining their rental business. These include:

• Marketing: Any money spent advertising your rental, whether online listings, print ads, signage, or even boosted social media posts, can be deducted as a business expense. These costs fall under the umbrella of finding and retaining tenants, which is considered an ordinary and necessary part of managing rental property.
• Home Office Expenses: If you manage your rental properties from a home office, you may be eligible to deduct a portion of your home-related expenses. This could include a percentage of your rent or mortgage, utilities, internet, and repairs, as long as the space is used exclusively and regularly for business. You can use the simplified deduction method (based on square footage) or the actual expense method.
• Independent Contractors or Employees: If you hire help, such as a handyperson, cleaner, property manager, or maintenance technician, you can deduct the amounts you pay for their services. Make sure to issue a Form 1099-NEC for independent contractors if you pay them $600 or more in a year.
• Professional Services (e.g., tax preparers, property managers, attorneys): Fees paid to professionals like accountants, attorneys, real estate agents, or property managers are fully deductible, as long as the services are related to your rental activity. This also includes legal advice for lease agreements or help with evictions.
• Utilities: If you, as the landlord, pay for utilities like water, electricity, gas, trash collection, or internet for the rental property, those costs are deductible. However, if tenants pay their own utilities, you cannot deduct them.
• Cost of Personal Property (e.g., furniture and appliances) Used in Rental Activity: Items like furniture, appliances, or tools used in the rental property can be depreciated or deducted under Section 179 or bonus depreciation rules, depending on the item and purchase amount. This includes refrigerators, stoves, washers/dryers, and landscaping equipment if you maintain the property yourself.

3 Things That Aren’t Tax Write-Offs For Landlords

1. Personal Expenses

You usually can’t deduct expenses that are personal and not related to the rental property. For example, this could include clothing, food, or even travel purchases. For example, traveling from home to a rental property is considered a personal expense. It is not deductible unless you go to and from your investment property for management or maintenance.

2. Expenses During Vacancy

Generally, you cannot deduct expenses related to rental property vacancy or not earning rental income. This could involve mortgage interest or advertising costs. Sometimes there are exceptions or particular laws that change this, but it’s dependent on your jurisdiction.

3. Fines & Penalties

Like other tax deductions, fines and penalties are generally not deductible for landlords. This includes any charges resulting from violating laws, regulations, or homeowners association (HOA) rules related to your rental property.

3 FAQs About Tax Deductions for Landlords

1. How does the IRS know if I have rental income?

There are several ways the IRS can determine that you have rental income. IRS agents often check real estate paperwork and public records to verify the information on your return. They also conduct audits on a small percentage of tax returns, which can reveal unreported rental income. It’s essential for landlords to correctly report all rental income and maintain proper records to avoid legal issues.

2. What is the $25,000 rental passive loss limitation?

The IRS allows up to $25,000 in rental real estate losses to be deducted against ordinary income if you actively manage the property and your modified adjusted gross income (MAGI) is $100,000 or less. This deduction phases out between $100,000–$150,000 MAGI and is eliminated above $150,000. Unused losses can be carried forward or used when you sell the property.

3. What is the tax rate on rental income?

Rental income is taxed as ordinary based on your federal income tax bracket, ranging from 10% to 37%. You can reduce your taxable rental income by deducting mortgage interest, property taxes, repairs, and depreciation expenses.

Hire TrueDoor to Make Tax Season Easier

Managing rental property taxes can be complicated, but TrueDoor makes it simple. Our expert property management team keeps detailed records of your income and expenses, provides year-end financial statements, and ensures everything is organized for your CPA or tax software. With TrueDoor, you save time, reduce stress, and get the support you need to maximize deductions and stay compliant.

Our expertise is essential for Southern California landlords. Our Orange County property management team and Inland Empire property management crew are ready to make your experience as an investment property owner seamless, especially during tax season. Contact us to benefit from our 5-star property management services!