The big deductions
These are the deductions that save landlords the most money:
- Mortgage interest: Deduct interest on loans used to acquire or improve rental properties.
- Depreciation: Deduct the cost of the building (not land) over 27.5 years for residential properties.
- Property taxes: Fully deductible as a rental expense.
- Insurance: Landlord insurance, liability coverage, and flood insurance are all deductible.
- Repairs and maintenance: Ordinary repairs are fully deductible in the year incurred.
- Property management fees: If you hire a manager, their fees are 100% deductible.
- Bonus depreciation: 100% bonus depreciation is permanent for qualifying property acquired after January 19, 2025, such as appliances and carpet, so these items can often be deducted in year one. The building itself still depreciates over 27.5 years.
- Qualified business income (Section 199A): the deduction continues for tax years after 2025, now with a new minimum deduction for owners who materially participate in the business. Whether a rental counts as a trade or business depends on the facts, so confirm with a CPA.
Commonly missed deductions
Landlords often forget these:
- Home office: If you manage rentals from a dedicated home office, deduct a percentage of home expenses.
- Travel: Mileage to and from rental properties (72.5 cents per mile for January–June 2026 and 76 cents for July–December, up from 70 cents in 2025), travel to inspect out-of-state properties, and meals during property-related travel.
- Legal and professional fees: Attorney fees, accountant fees, and eviction court costs.
- Advertising: Listing fees, signs, photography, and website costs.
- Education: Books, courses, and seminars related to real estate investing.
- Utilities: If you pay utilities during vacancy periods, they're deductible.
Repairs vs. improvements
This is the #1 audit trigger for landlords. Repairs (fixing what's broken) are deductible immediately. Improvements (adding value or extending useful life) must be depreciated over 27.5 years.
- Repair: Fixing a leaky roof, replacing a broken water heater, patching drywall.
- Improvement: New roof, kitchen remodel, adding a deck, replacing all windows.
- Gray area: If a repair is part of a larger improvement project, the IRS may classify the whole project as an improvement.
Documentation requirements
The IRS requires receipts for all deductions. Best practices:
- Use a dedicated business credit card for all rental expenses.
- Scan and upload receipts immediately — don't wait until tax season.
- Categorize expenses monthly, not annually.
- Keep a mileage log for all property-related driving.
- Save contractor invoices and W-9s. The 1099-NEC filing threshold rises from $600 to $2,000 for payments made in 2026, but you still need to record every payment.
When to hire a CPA
If you own 1–3 units with simple finances, tax software (TurboTax, H&R Block) may suffice. If you have 4+ units, out-of-state properties, partnerships, or complex renovations, hire a CPA who specializes in real estate.
A good real estate CPA costs $500–$2,000/year but typically saves you 2–5x their fee in deductions you would have missed. They also represent you in an audit — worth the price alone.
This is general information, not tax advice. Rules and rates change, so confirm current figures for your tax year.
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