Rental Property Deductions From A to Z (Including the Ones Landlords Miss)

Rental real estate is one of the most tax-favored investments in the code — but only for landlords who actually capture what they’re entitled to. Here’s the full map.

The straightforward deductions

Mortgage interest (not principal), property taxes (on Schedule E — they don’t consume your personal SALT cap), insurance, HOA dues, utilities you pay, advertising, leasing fees, property management, legal and accounting fees, and software. All fully deductible against rental income, no itemizing required.

Depreciation: the big one

The building (not the land) deducts over 27.5 years — roughly 2.5–3% of the structure’s basis, every year, in cash you never spent. On a $400,000 property with $300,000 allocated to the building, that’s ~$11,000 a year. Two rules landlords learn the hard way: depreciation is mandatory (recapture at sale applies whether you took it or not), and the land/building allocation should be documented, not guessed. Appliances, flooring, and site improvements depreciate on faster schedules — which is where cost segregation enters for larger properties.

Repairs vs. improvements: the eternal question

Repairs — fixing what broke, keeping the property in ordinary operating condition — deduct now. Improvements — betterments, restorations, adaptations — capitalize and depreciate. Patching a roof section: repair. Replacing the roof: improvement. Helpful escape hatches: the de minimis safe harbor lets you expense items under $2,500 per invoice with a simple policy, and small landlords may qualify for the safe harbor for routine maintenance. When in doubt, the invoice wording and your documentation drive the answer.

The ones people miss

Travel and mileage to the property, the hardware store, and showings — with a log.

Home office, if you genuinely manage the rentals from a dedicated space.

Cell phone and internet business-use percentage.

Education — landlord courses, books (once you’re in the business).

Casualty losses and insurance deductible payments after covered events.

Points and loan costs, amortized over the loan’s life — and the unamortized balance deducts when you refinance with a new lender.

The rule that governs whether losses help you now

On paper, depreciation often turns cash-flow-positive rentals into tax losses. Whether you can use those losses this year depends on the passive activity rules: rental losses generally offset only passive income, with two exceptions — the $25,000 allowance for active-participation landlords (phasing out between $100K–150K of income), and real estate professional status for those who genuinely work in real estate more than half their working time. Losses you can’t use aren’t lost; they suspend and carry forward, releasing against future income or when you sell.

The system that captures all of it

A separate bank account per property (or at least per portfolio), every expense through it, receipts scanned on the spot, a mileage app, and a January folder-check before your CPA asks. The landlords who do this deduct thousands more than the ones reconstructing a year from bank statements — same properties, same spending, different discipline.

Romanchuk CPA LLC is a fully virtual CPA firm serving individuals and business owners nationwide since 2014, with NJ/NY depth. Book a consultation at rfg.tax.

This article is general information, not tax advice for your specific situation. Figures adjust annually — verify current amounts.