Tax Deductions for Rental Property Owners – Everything You Need to Know

Last updated 03/26/2024 by

It’s said that you have to spend money to make money, and that especially rings true for landlords. Between travel costs, repairs and maintenance, insurance, etc., you have more than your fair share of expenses as a rental property owner. Thankfully, tax deductions help you recover some of that lost income.

But how do you know which expenses the IRS considers to be tax deductible? Consider this article your all-in-one resource for rental property tax deductions.

What expenses can you deduct on your taxes?

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1. Taxes

Yes, you read that right. You can deduct your taxes on your taxes. It makes sense that you can deduct the real estate taxes on your rental property. But did you know that you can deduct state, county and local sales taxes, too?

2. Travel

All of those trips to and from your rental property add up. Even if you live close to your rental property, it could still be a good idea to deduct the car mileage you’ve accumulated when collecting rent and inspecting and maintaining the property. For 2017, the IRS has set the standard mileage deduction at 53.5 cents per mile.

However, let’s say that you’re a part of the 50% of landlords that live far away from their properties. You’ll be able to deduct flights, car mileage, hotel costs and whatever expenses you’ve accumulated on your way to and from checking in on your rental property.

The exception? If the purpose of your visit is to renovate your property. That’s under capital improvements, which we’ll get to in a minute.

3. Depreciation

Your largest expense as a rental property owner will be the actual cost of the rental property. Fortunately, you can deduct the cost of your property over time, which his what “depreciation” means.

Keep in mind that your property has to meet four requirements to be eligible for depreciation:

You are the owner of the property.
The property produces income.
The property is assumed to last more than one year.
It’s possible for the property to lose its value (a.k.a. its determinable useful life).

You can learn more about the different types of depreciation here.

4. Repairs

A major repair, like replacing the roof or windows, is considered a capital improvement. You can deduct these expenses through depreciation.

5. Maintenance

Maintenance, such as painting, cleaning services, lawn services, etc., differs from capital improvements because they are minor updates. They can be deducted in full.

6. Insurance

If you have employees, you can deduct their worker’s compensation and health insurance. Even if you’re just a one-person operation, you can still deduct almost any type of insurance you use to cover your rental property, such as fire, theft, flood and more.

7. Utilities

You can deduct your tenants’ utilities come tax season if you pay for them. All utility bills are eligible, such as water, sewer, electricity, gas, etc… You name it.

8. Dues

Chances are that if your rental property is a condo, then you most likely have to pay homeowners association dues. The great news is that you can deduct that expense from your taxes as well.

9. Legal and professional fees

Any legal and professional fees associated with your rental property are fair game for a tax deduction. Perhaps you used a tax accountant or consulted a lawyer for an eviction. Whatever the case may be, you’re able to deduct those fees.

10. Advertising

You even get to recuperate your marketing costs. For example, if you paid for a print ad, Facebook ad, radio ad or some other form of advertising, you can deduct the cost on your tax return.

11. Business expenses

You might have just one rental property, but your rental property is still considered to be a business. That means that office space, office supplies, and additional operating expenses are all deductible.

12. Loan Interest

Types of interest you can deduct:

Mortgage interest
Personal loans
Credit cards

However, these loans must be used to either buy the property or for purchases related to the rental.

13. Rental Losses

While owning a rental property is a stable source of income, slumps do happen. However, you don’t need to despair. The government has your back where this is concerned, because you can deduct rental losses on your taxes.

The amount you can deduct depends on whether you’re a professional landlord or non-professional landlord, which really just boils down to how much of your time you spend on your rental property.

[Make it look like a dictionary definition] Professional landlord: You spend a minimum of 62.5 hours per month every year in your rental business, and over half of your time is dedicated to your rental property or properties. [Table]Table title: How much rental loss can you deduct? Professionals: All of your rental losses. Non-professionals: Up to $25,000 of your rental losses against your overall income.

There’s good news for you non-professionals, too. Any rental losses past the $25,000 cap can be deducted in the following year.

14. Management and broker fees

Some landlords find it more efficient to use a broker to help place tenants and/or a property management company to handle the day-to-day tasks associated with owning a rental property. You can deduct these fees (which is normally a percentage of the annual rent) on your taxes as well.

Keeping track of your expenses

Whether you use a tax professional or not, you can’t take advantage of the tax deductions if you don’t have proof of your expenses. What you keep track of depends on whether or not you have formed your own business entity.

If you haven’t done so and don’t have any employees, then you all you need is 1) a record of your rental income and expenses and 2) supporting documents for your income and expenses.

You can use excel and Quickbooks to keep your records. It might be a good idea to get a receipt scanner or just take pictures of receipts with your phone. That way, you’ll constantly be logging your receipts instead of taking hours to log them during tax season.

Looking to buy a second rental property or just getting into the industry? Learn how you can finance your next rental property now.

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