Rental Property Tax Deductions: What Landlords Can Claim

Rental Property Tax Deductions: What Landlords Can Claim in 2026

Rental income is taxable, but the tax code provides extensive deductions that can significantly reduce — or sometimes eliminate — your net taxable rental income. Understanding every deduction available to you is essential for managing rental property profitably.

The Golden Rule: Deduct in the Year You Pay

Most rental expenses are deducted in the tax year you pay them, not the year the expense is incurred or invoiced. Cash-basis accounting (the default for most individual landlords) means your checkbook date drives your deduction timing.

Deductible Rental Expenses

Mortgage Interest

The interest portion of your mortgage payment is fully deductible. Your lender's annual Form 1098 shows the total interest paid. This is typically the largest deduction for most landlords.

Depreciation: The Biggest Hidden Deduction

Residential rental property is depreciated over 27.5 years using the straight-line method. The annual depreciation deduction equals the cost basis of the structure (not land) divided by 27.5.

Example: You purchase a rental for $300,000. The land is worth $50,000. Your depreciable basis is $250,000. Annual depreciation: $250,000 ÷ 27.5 = $9,091 per year.

This deduction reduces taxable rental income without any cash outlay. It is the primary reason rental properties often show a tax loss even with positive cash flow.

Important: Depreciation claimed must be recaptured (taxed at 25%) when you sell the property.

Property Taxes

State and local property taxes are fully deductible as a rental expense (not subject to the $10,000 SALT cap, which applies only to personal property taxes on Schedule A).

Insurance

Landlord insurance, umbrella liability coverage, and flood insurance premiums are deductible.

Repairs and Maintenance

Repairs that keep the property in its current condition — fixing a broken furnace, patching a roof leak, repainting — are deductible in the year paid.

Capital improvements (adding a new bathroom, replacing the roof) must be depreciated, not deducted immediately. The distinction: repairs restore existing condition; improvements add value or extend useful life.

Property Management Fees

If you use a property management company, their fees are deductible. This includes both the monthly management fee (typically 8-12% of rent) and leasing fees charged when placing a tenant.

Advertising

Online listing fees (Zillow, Apartments.com), photography, signage, and other advertising costs to find tenants are deductible.

Travel for Rental Activities

Mileage driven to the property for repairs, inspections, and property management is deductible at the standard mileage rate (67 cents/mile for 2024). Local travel for rental errands also qualifies.

Professional Services

• Accountant fees for preparing your rental income return
• Attorney fees for lease preparation or tenant disputes
• Real estate attorney fees for closings (add to basis)

Utilities You Pay

If you pay water, trash, electricity, or gas for the rental unit (even temporarily between tenants), those costs are deductible.

HOA Fees

Monthly or annual homeowners association fees are deductible rental expenses.

Passive Loss Rules

Rental activities are generally classified as passive income. Passive losses can only offset passive income — not wages or investment income. However, an exception allows you to deduct up to $25,000 in rental losses against ordinary income if:

• You actively participate in the rental activity (make management decisions)
• Your MAGI is below $100,000

The $25,000 allowance phases out between $100,000 and $150,000 MAGI.

Real estate professionals (over 750 hours per year in real estate activities) can deduct rental losses without limitation.

Depreciation Strategy: Cost Segregation

For higher-value properties, a cost segregation study identifies components that can be depreciated faster than 27.5 years — appliances (5 years), flooring (15 years), parking lots (15 years). This front-loads depreciation deductions and improves early-year cash flow.