Top Tax Deductions Every Landlord Should Know (And the Ones You're Probably Missing)

By PropsManager Team · Rent & Finance · Mar 31, 2025

I'll never forget the first year I filed taxes as a landlord. I handed my CPA a shoebox — literally a shoebox — stuffed with receipts, bank statements, and a crumpled napkin where I'd scribbled a plumber's invoice. She looked at me, sighed, and said, "You left about $8,400 on the table last year." That stung worse than the $3,200 water heater replacement I'd paid for in January.

Here's the thing: rental real estate is one of the most tax-advantaged investments in America. The IRS practically rolls out the red carpet for landlords. But those deductions only work if you know they exist and can actually prove them.

According to the National Association of Realtors, the average landlord misses between $5,000 and $12,000 in legitimate deductions annually. That's not pocket change — that's a new HVAC system every couple of years. So let's walk through every deduction you should be claiming, including a few that even seasoned investors overlook.

Disclaimer: We're property management folks, not CPAs. This article is for educational purposes. Always consult a qualified tax professional for advice specific to your situation.

Mortgage Interest: Your Biggest Single Write-Off

For most landlords, mortgage interest is the heavyweight champion of deductions. On a $300,000 rental property with a 30-year mortgage at 7%, you're paying roughly $19,900 in interest during the first year alone. Every penny of that is deductible against your rental income.

This applies to:

• The primary mortgage used to purchase the rental property
• Home equity loans used to improve the rental (not for personal use)
• Refinanced loan interest, as long as the property remains a rental

One thing that trips people up: if you refinance and pull cash out for personal expenses, only the portion of interest attributable to the rental qualifies. Your lender sends you Form 1098 each year showing total interest paid, but it's on you to split it correctly if funds were mixed.

Points and Loan Origination Fees

Paid points to buy down your interest rate? Those are deductible too — but for rental properties, you typically amortize them over the life of the loan rather than deducting them all at once. On a 30-year mortgage, that means writing off 1/30th each year. Not glamorous, but it adds up.

Depreciation: The "Phantom Expense" That Saves You Thousands

Depreciation is hands-down the most powerful — and most misunderstood — deduction in a landlord's toolkit. The IRS lets you write off the cost of your building (not the land) over 27.5 years for residential property.

Let's run the numbers. Say you bought a duplex for $400,000, and the land is assessed at $80,000. That means the building is worth $320,000. Divide by 27.5 years, and you get a depreciation deduction of roughly $11,636 per year. That's $11,636 in taxable income that vanishes — no cash leaves your pocket.

Here's what makes depreciation so powerful: you're deducting the "wear and tear" on a building that's probably appreciating in value. It's a legal fiction that works entirely in your favor.

Cost Segregation Studies

If you own a property worth $500,000 or more, ask your CPA about a cost segregation study. This engineering-based analysis reclassifies certain building components — carpeting, appliances, landscaping, parking lots — into shorter depreciation schedules (5, 7, or 15 years instead of 27.5). The upfront cost runs $5,000 to $15,000, but it can accelerate $50,000 to $100,000+ in deductions into the early years of ownership.

I had a cost seg study done on a 12-unit apartment building I purchased in 2019. The study cost $8,500 and generated over $72,000 in accelerated first-year depreciation. That's an absurd return on investment.

Bonus Depreciation

Under current tax law, bonus depreciation allows you to deduct a significant percentage of qualifying asset costs in the first year. The rate has been phasing down — it was 80% in 2023, 60% in 2024, 40% in 2025, and will hit 20% in 2026. Even at reduced rates, pairing bonus depreciation with a cost segregation study can be a game-changer.

Repairs vs. Improvements: The Distinction That Matters Most

The IRS draws a hard line between repairs (deductible immediately) and improvements (depreciated over time). Getting this wrong is one of the most common audit triggers for landlords.

What Counts as a Repair

Repairs restore something to its original condition. They're fully deductible in the year you pay for them:

• Fixing a leaky faucet ($150-$300)
• Patching drywall after a tenant moves out ($200-$500)
• Replacing a broken window ($175-$400)
• Repainting a unit between tenants ($800-$2,500)
• Snaking a clogged drain ($125-$250)
• Replacing a garbage disposal ($250-$450)

What Counts as an Improvement

Improvements add value, extend the useful life, or adapt the property to a new use. These get depreciated — typically over 27.5 years for residential property:

• New roof ($8,000-$25,000)
• Kitchen remodel ($15,000-$40,000)
• Adding a bedroom or bathroom ($20,000-$60,000)
• New HVAC system ($5,000-$12,000)
• Replacing all windows ($8,000-$20,000)

Repair vs. Improvement Comparison Table

The gray area? A lot bigger than you'd think. Replacing a single appliance in a unit is generally a repair. Replacing all appliances as part of a renovation is an improvement. When in doubt, document your reasoning and discuss it with your CPA.

Property Taxes and Insurance

This one's straightforward but worth mentioning because the numbers are significant.

Property taxes on your rental are fully deductible as a business expense. The national average is about 1.1% of assessed value, which means on a $350,000 property, you're deducting roughly $3,850 per year. In states like New Jersey or Illinois, that number could be double or triple.

Insurance premiums are also fully deductible. This includes:

• Landlord insurance / dwelling fire policy ($1,200-$3,000/year)
• Umbrella liability coverage ($200-$500/year for $1M coverage)
• Flood insurance if required ($700-$2,500/year)
• Workers' comp if you have employees

Don't forget: if you require tenants to carry renters insurance — and you absolutely should — that doesn't reduce your own insurance deduction. They're separate policies covering different things.

Travel and Mileage

Every trip you make to your rental property for management, maintenance, or inspections is deductible. You've got two options:

1. Standard mileage rate: 70 cents per mile in 2025. Drive 20 miles round-trip to check on a property twice a month? That's 480 miles per year, or $336 in deductions.
2. Actual expense method: Track gas, maintenance, insurance, and depreciation on your vehicle, then deduct the business-use percentage.

For most landlords with a few properties, the standard mileage rate is simpler and often more generous. But if you're running around to 15+ units regularly, the actual expense method might win out.

Long-Distance Travel

Own a rental property in another state? Airfare, hotels, rental cars, and meals (50% for meals) during property-related trips are all deductible. The key is that the primary purpose of the trip must be business. You can tack on a personal vacation day or two, but if the IRS decides the trip was mainly pleasure, you lose the whole deduction.

I fly from Dallas to check on my Austin properties twice a year. Round-trip flights, a night at a hotel, and meals — usually around $600-$800 per trip — all deductible. I keep the boarding passes, hotel receipts, and a simple log of what I did while there (inspected Unit 3B, met with contractor about bathroom remodel, reviewed lease with tenant in Unit 1A).

Professional Services and Management Fees

Any professional you pay to help manage your rental business is a write-off:

• CPA or tax preparer: $300-$800 per return for a rental property schedule
• Attorney fees: Lease drafting, eviction proceedings, LLC formation
• Property management software: Tools like PropsManager that handle rent collection, maintenance tracking, and financial reporting are 100% deductible
• Property management company fees: Typically 8-12% of collected rent
• Bookkeeping services: $100-$300/month

If you're still tracking rent payments on a spreadsheet and stuffing receipts in that shoebox, you're making tax time harder than it needs to be. A platform like PropsManager automatically categorizes expenses, generates reports, and keeps everything audit-ready — and the subscription is fully deductible as a business expense.

Advertising and Tenant Screening

Every dollar you spend finding tenants is deductible:

• Zillow or Apartments.com listing fees ($30-$100 per listing)
• Professional photography ($150-$300)
• "For Rent" signs ($20-$50)
• Tenant screening costs (credit checks, background checks) — $25-$50 per applicant
• Social media advertising ($50-$200 per campaign)

Even if a unit doesn't rent right away, those marketing costs are still deductible in the year you incur them.

Home Office Deduction

If you manage your rental properties from a dedicated space in your home — and it's used exclusively and regularly for that purpose — you can claim the home office deduction. The simplified method allows $5 per square foot, up to 300 square feet, for a maximum deduction of $1,500.

The regular method is more complex but potentially more valuable. You calculate the percentage of your home used for business and apply that to mortgage interest, property taxes, utilities, insurance, and maintenance on your personal residence.

Fair warning: the home office deduction has historically been an audit magnet. Make sure your office space genuinely qualifies. A corner of your dining room table doesn't cut it. A spare bedroom with a desk, filing cabinet, and computer that you use exclusively for property management? That works.

Deductions Most Landlords Forget

Here's where the real money is. These are legitimate deductions that even experienced landlords routinely miss:

Education and Training

Attending a landlord association meeting? Deductible. Real estate investing seminar? Deductible. Books, courses, and subscriptions related to property management? All deductible. I deduct about $400-$600 per year in books and online courses alone.

Utilities Paid by the Landlord

If you cover water, sewer, trash, gas, or electric for your rental units, those are deductible. Common in multi-family properties where utilities aren't separately metered.

Pest Control

Regular pest control services run $100-$300 per quarter per property. Understanding who's responsible for pest control — landlord vs. tenant — matters both legally and for your tax return.

HOA Dues

If your rental property is in a homeowners association, those monthly dues (often $200-$600/month) are fully deductible. That's potentially $2,400-$7,200 per year you might be overlooking.

Casualty and Theft Losses

If your rental property suffers damage from a federally declared disaster, you can deduct uninsured losses. This changed after the Tax Cuts and Jobs Act — personal casualty losses are now limited, but losses on business property (including rentals) remain deductible.

Legal and Entity Formation Costs

Setting up an LLC for your rental properties? Those formation fees ($100-$800 depending on the state) plus annual registered agent fees ($100-$300) are deductible.

Startup Costs

Spent money investigating a property before you bought it? Appraisal fees, inspection costs, and travel to view potential investments can be deductible as startup costs, up to $5,000 in the first year.

Record-Keeping: The Difference Between Deducting and Dreaming

None of these deductions matter if you can't prove them. The IRS requires "adequate records" — which means receipts, bank statements, mileage logs, and documentation showing the business purpose of each expense.

Here's my system after years of trial and error:

1. Photograph every receipt immediately. Paper fades. Use your phone or a dedicated app.
2. Separate bank accounts. One account per property, or at minimum, one account for all rental activity that's completely separate from personal funds.
3. Track mileage in real time. Don't try to reconstruct it in April. A simple app or notebook in your car works.
4. Categorize as you go. Using PropsManager's expense tracking means every payment is automatically tagged to the right property and category. When tax time comes, you export a report instead of sorting through a year's worth of chaos.
5. Keep records for at least 7 years. The IRS typically has 3 years to audit, but that extends to 6 years if they suspect underreported income by 25% or more.

Tax Deductions Checklist for Landlords

Use this checklist to make sure you're not leaving money on the table:

• Mortgage interest (Form 1098)
• Depreciation (building cost ÷ 27.5)
• Property taxes
• Insurance premiums (landlord, umbrella, flood)
• Repairs and maintenance
• Property management fees or software
• Advertising and tenant screening
• Travel and mileage
• Professional services (CPA, attorney)
• Home office expenses
• Utilities paid by landlord
• HOA dues
• Pest control
• Landscaping and snow removal
• Education, books, and training
• Legal and entity formation costs
• Casualty and theft losses
• Loan origination fees (amortized)
• Cleaning and turnover costs between tenants

Explore More PropsManager Resources

Looking for the right property management software? Check out our in-depth guides:

• Compare Property Management Software — See how PropsManager stacks up against Buildium, AppFolio, Rent Manager, and Propertyware.
• Software for Small Landlords — Built for landlords managing 1–50 units without the enterprise price tag.
• AI-Powered Property Management — Discover how automation can save you 5–10 hours per week.
• Solutions for Property Managers — Scale from 50 to 500+ units without scaling your costs.

Frequently Asked Questions

Can I deduct the full purchase price of a rental property?

No. You can't deduct the purchase price as a lump sum. Instead, you depreciate the building portion (not the land) over 27.5 years for residential rental property. So a $350,000 property where the land is worth $70,000 gives you a depreciation deduction of about $10,182 per year ($280,000 ÷ 27.5). That said, a cost segregation study can accelerate some of that depreciation into the first few years.

What happens if my rental expenses exceed my rental income?

If your deductions create a rental loss, you may be able to deduct up to $25,000 of that loss against your other income (like W-2 wages) if your modified adjusted gross income is under $100,000. This phases out between $100,000 and $150,000 MAGI. Above $150,000, passive losses generally carry forward to future years unless you qualify as a real estate professional.

Do I need to keep physical receipts, or are digital copies acceptable?

The IRS accepts digital records — scanned receipts, bank statements, and electronic records — as long as they're legible and accurately reflect the transaction. In fact, digital records are often better because paper fades and gets lost. Platforms like PropsManager let you attach receipt images directly to expense entries, keeping everything organized and audit-ready.

Can I deduct renovation costs before my first tenant moves in?

Yes, but it depends on what you did. Repairs made to get the property in rentable condition are deductible in the year the property is placed in service. Improvements (new roof, kitchen remodel, added bathroom) must be capitalized and depreciated. The critical date is when the property is "available for rent" — deductions start from that point, not the purchase date.

Is property management software tax deductible?

Absolutely. Software subscriptions used for managing rental properties — including rent collection, maintenance tracking, tenant screening, and financial reporting — are 100% deductible as a business expense in the year you pay for them. This includes tools like PropsManager, which typically pays for itself in time savings alone, plus you get the tax deduction on top.

Stop Leaving Money on the Table

Look, the tax code is complicated. I get it. But every deduction you miss is money you're voluntarily handing to the IRS — money that could be going toward your next property, a reserve fund, or that kitchen remodel in Unit 4 you've been putting off.

The landlords who pay the least in taxes aren't the ones gaming the system. They're the ones who keep meticulous records, understand what's deductible, and have systems in place to capture every legitimate write-off throughout the year.

That's exactly what PropsManager was built for. Automated expense categorization, receipt storage, financial reporting by property — everything your CPA wishes you'd been doing all along. Start your free trial or request a demo and see how much easier tax season can be when your records are already organized.

Your future self — the one sitting across from a CPA in April — will thank you.