Landlord tax deductions

Real estate comes with some of the best tax advantages in the world. Landlord tax deductions include just about every conceivable expense associated with rental properties – plus some just-on-paper expenses.

But tax laws change fast, so investors need to stay on top of real estate tax deductions and other tax law changes. So, before you jump into the rental property tax deductions checklist, make sure you’re up to speed on how recent tax law changes affect landlords’  tax returns.


23 Rental Property Tax Deductions for Landlords

Real estate investors can deduct the following 23 rental property expenses, to keep more of your money in your pocket where it belongs. It’s not 100% exhaustive, as there are a few obscure rental property tax deductions that only apply to a few landlords, but think of this as a rental property deductions checklist for the average landlord.

IMPORTANT: These rental property tax deductions are “above the line” deductions, meaning they come directly off your taxable income for rental properties. That means you can deduct these expenses, and still take the standard deduction!


1. Losses from Theft or Casualty

The TCJA suspended the itemized deduction for personal casualty and theft losses for 2018 through 2025. Before 2018 deductions of this kind were permitted when they exceeded $100.

But landlords can still deduct losses from theft or damage to their rental properties, as business expenses.


2. Property Depreciation

Depreciation makes for a handy “paper expense.” Much of the cost of buying your property can be written off as a tax deduction, although it must be spread over 27.5 years (don’t ask me where that number came from). Buildings lose value as they age (at least theoretically), so the IRS lets you deduct 1/27.5th of the property’s cost each year.

Major property upgrades and “capital improvements” must be depreciated as well, rather than deducted in the year you make them. For example, a new roof is a capital improvement that must be depreciated, rather than deducted all at once.

But the patching of a roof leak? That’s a repair.

Read more about rental property depreciation before writing it off, and use our rental property depreciation calculator to make your life easier.


3. Repairs & Maintenance

Basic repairs and maintenance such as new paint and new carpets are deductible for your rental properties. That’s not the case for your primary residence, in which repairs are not deductible.

Remember, if it’s a large improvement or replacement (like the roof example), it may count as a “capital improvement,” in which case you’ll have to spread the deduction over multiple years, in the form of depreciation.

The line isn’t always crystal clear however, like the roof example above. Here’s an example of how it gets blurry: if you replace all your windows to modernize and improve your energy efficiency, it’s a capital improvement. If a baseball goes through one window, which you replace, it’s a repair. But what if you replaced a few windows last year, but not all?

Talk to an accountant, and build a defensible argument for any repairs you deduct.


4. Segmented Depreciation

Some improvements, such as landscaping and “personal property” inside the rental/investment property (e.g. refrigerators) can be depreciated faster than the building itself. It’s more paperwork, to segment the depreciation of certain improvements as separate from the building’s depreciation, but it means a lower tax bill right now, not in the far distant, unknowable future.


5. Utilities

Do you pay for gas, heating, trash removal, sewer or any other utility for your rental? Be sure to deduct these costs when you file your tax return.

Take heed however, these if your tenant reimburses you for a utility, that would be considered income. So you have to declare both the income and the expense, even though they offset each other.


6. Home Office

This is a popular deduction, but it’s also one you need to be careful about, as it can trigger audits. You have to set aside a percentage of your home for only doing work/business/real estate investing-related activities, and that percentage of your housing bill can be deducted. The IRS has put this deduction under the microscope in recent years.

One recent downer: no more home office deduction for those who work for others in the comfort of their home. But as a real estate investor, you’re a business owner, so you can still claim it if you use the space “exclusively for business.”

Make sure and talk to an accountant about this, and keep the percentage realistic.


7. Real Estate-Related Travel

Another popular-but-dangerous deduction, you can deduct travel expenses if your travel was for your real estate investing business… and you can prove it. Many people get cute with this one, and when they go on vacation they’ll go see one or two “potential investment” properties and then write the entire trip off as a business expense.

Whenever you plan on deducting travel expenses, put together as much documentation as you possibly can so that you can make a strong case that it was an actual business trip. For example, meet with a real estate agent in the area, and keep all of your email correspondence with them. Keep all listing information and investment calculations for any properties you visit. Track your mileage for all driving done to and from rental properties.



8. Meals

This one’s dangerous too, but still legal.

Landlords and real estate investors can deduct 50% of meal costs while traveling to visit properties they already own. They cannot write off meals when scouting for prospective rental properties.

In your home market, defined as a 40-mile radius of where you live, you can deduct 50% of meal costs when meeting with other business contacts, such as partners, real estate agents, or contractors. Real estate investors cannot take a deduction for meals they eat alone in their home market.

As with the other rental property deductions on this list, always keep receipts and documentation, and always be prepared to defend all deductions if audited by the IRS!


9. Closing Costs

Many closing costs are tax deductible, and others can be depreciated over time as part of your acquisition cost. Use an accountant with a deep knowledge of real estate investments, and send them the settlement statement (previously called a HUD-1, now known as a CD or closing document) for each property you bought last year.


10. Property Management Fees

Paid a property manager to handle the headaches and field those dreaded 3 AM phone calls from tenants? You can write off their management fees, including monthly percentage fees, new tenant placement fees, and any other fees the manager slaps you with.

If you’re still on the fence about hiring one, here’s what you should know about whether to hire a property manager.

What the #%& are real estate syndications, and do they really earn 15-50% returns?

11. Rental Property Insurance & Rent Default Insurance

Like homeowner’s insurance for your primary residence, your landlord insurance premium for each property is also tax deductible.

Except unlike homeowner’s insurance, you don’t have to itemize your personal deductions to take landlord insurance as a rental property deduction.


12. Rent Default Insurance

You can also deduct the cost of rent default insurance policies for each property. Not familiar with rent default insurance? If the tenant stops paying the rent, the insurance company pays it until you go through the eviction process and sign a lease agreement with a new tenant. It protects you against tenants failing to pay rent, so you never go without rental cash flow.

They’re not very expensive either, usually ranging between $300-900 per year. Try The Guarantors or Steady, we’ve vetted both as a reputable and easy insurance provider to work with.

For that matter, often the renter foots the bill for rent default insurance policies, making the landlord deduction a moot point. 


13. Mortgage Interest

All interest you pay to your mortgage lender on rental property loans remains tax deductible. As mentioned above, it’s an “above the line” deduction that simply comes off of your taxable rental property income.

But for your primary residence, the IRS limits the deductibility of mortgage interest only up to $750,000 of home mortgage debt for tax year 2021.


14. Mortgage Insurance (PMI/MIP)

No one likes mortgage insurance (other than banks). But at least you can deduct the cost from your taxable rental property income.

Note that mortgage insurance only applies to conventional and FHA loans, not privately issued portfolio loans. If you borrowed your rental property loan through a private portfolio lender like Kiavi or LendingOne, you don’t have to worry about mortgage insurance.

While you’re at it, check to see if any of your mortgage balances have fallen below 80% of their respective property values. If so, you can apply to have PMI removed from the loan, and potentially save yourself hundreds of dollars per month.

The same goes for your home, not just your rental properties!


rental property tax deductions15. Accounting, Legal & Other Professional Fees

All professional fees associated with your rental properties are tax deductible. Bookkeeping, accounting, attorney, real estate agent and any other fees you pay out for professional services can be deducted from your taxable income. Don’t forget the cost of any bookkeeping or landlord software (ahem!) you use.

One wrinkle introduced by the TCJA however is that personal tax preparation expenses are no longer deductible since 2018. But business accounting – such as for your real estate LLC or S-corp – is still deductible as a rental business expense for landlords. Talk to your accountant about shifting as many of your tax preparation expenses as possible to the business side of the books!


16. Tenant Screening

If you paid for tenant credit reports, criminal background checks, identity verifications, eviction history reports, employment and income verification or housing history verification, those fees are deductible.

Even better, have the applicant pay directly for tenant screening report costs. Which, I might add, our landlord software allows you to do!


17. Legal Forms

Bought a state-specific lease agreement this year? Eviction notices? Property management contracts? The cost of legal forms is also deductible.

Although I have to add that we offer free tenant letters and state-specific eviction notices, so you don’t need to pay for them at all.


18. Property Taxes

Under the Tax Cuts and Jobs Act, landlords can still deduct rental property taxes as an expense.

But it’s a little more complicated for homeowners, and even though this is a list of landlord tax deductions, let’s take a moment to review the changes for homeowners, shall we?

For tax year 2021, you can no longer deduct for state and local taxes in excess of $10,000. These state taxes include things like: state and local income tax, sales taxes, personal property tax, and… homeowner property taxes.

What does this mean for high-tax states like New York, New Jersey or Connecticut? Well, it could mean that more people may relocate to lower-tax states like Florida, and may even spark lower property values in states such as New Jersey. Only time will tell.


19. Phones, Tablets, Computers, Phone Service, Internet

Bought a new phone this year? Maybe a new laptop or tablet? If you use it for work, you can probably persuade your accountant (and the IRS) that the costs should be deducted from your taxable income. Or, more likely depreciated, as most of these devices come with a lifespan that the IRS classifies in multiple years.

Likewise, for internet bills, phone service charges and the like, with the caveat that you need to be able to document that it was for business purposes. Printer toner, computer paper, pens, and the like; keep those receipts.


20. Rental Property Licensing & Registration Fees

Licensing and registration fees are sometimes a local requirement for rental properties. For instance, in the city of Philadelphia, a rental license fee is required along with an inspection of the property.

So, if you’ve had to purchase or renew a landlord or rental license for the property, that cost is deductible.

Furthermore, some localities will require a vacation rental license for short term rentals such as seasonal, AirBnB and the like. These licensing costs are deductible as well.


21. Occupancy Tax

There are states that assess an occupancy tax on collected rental amounts, comparable to paying sales tax. You see this more often in states where short-term rentals are common. Florida, Arizona and New Jersey are examples of states that charge an occupancy or tourist tax.

If you own rental property in an area that charges an occupancy-like tax, then the amount is tax deductible. Remember, however, that the tax will not only differ from state to state but also from local jurisdictions like cities and counties.


22. Business Entity Pass-Through Deduction

The TCJA made significant changes to how legal entities (e.g. LLCs) and pass-throughs are treated. Sole Proprietorship, Partnership, and Corporate Entities are now entitled to a “pass-through” deduction as long as the rental activities meet the requirements for business tax purposes.

The short version is that landlords can deduct 20% of their rental business income from their taxable business income amount. For example, if you own a rental property that netted you $10,000 last year, the pass-through deduction reduces your taxable rental business income from $10,000 to $8,000. Pretty sweet, eh?

There are restrictions, of course. The deduction phases out for single tax payers with adjusted gross incomes over $163,300, and married taxpayers earning over $326,600. Although under some conditions, higher-earning landlords can still take advantage of the pass-through deduction definitely discuss with your accountant.

One more reason, beyond asset protection, to own rental properties under a legal entity!

Lastly, beware that the pass-through deduction is currently scheduled to expire at the end of 2025, unless extended by Congress.

We’ve said it before and we’ll say it again: talk to an accountant before taking this deduction. It gets complicated quickly, and you don’t want to end up in boiling water with the IRS.


23. “Augusta Rule” Home Rental Deduction

The Augusta Rule (IRS Section 280A) lets homeowners rent out their home for up to 14 days each year, and pay no income taxes on the rent. Named after Augusta, GA, the rule has its origins in letting homeowners rent out their houses to guests during the Masters golf tournament.

Yes, you could rent out your home on Airbnb for up to two weeks a year for tax-free income. But business owners can get even more creative with the Augusta Rule.

If you own a business as either a partnership LLC, S-corp, or C-corp, you can rent out your home to your business using the Augusta Rule. That lets you double dip on tax breaks: you rent the property to your business and write it off as a business expense. That transfers money from your business to you personally, and you don’t pay any taxes on it as personal income.

For example, say you plan an annual retreat for your employees or senior management. Instead of booking space at a hotel, you book your own home. You pay yourself $500 per day for five days of usage, plus a day for setup and breaking down the space. That comes to $3,500 of both tax deduction for your business and tax-free income for you personally.

Not too shabby.

It comes with a few limitations however. You can’t take advantage of the Augusta Rule as a sole proprietor. You must also pay fair market rent to yourself for your home — inflate the rent at your peril. Look up comparable rents for short-term usage, through sites like Airbnb. 

And, of course, keep excellent records. If the IRS audits you, you need to prove that the rental was for legitimate business purposes, and that your business paid market rates for rent. 

(article continues below)

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Regular Income Tax Rates

From 2018 through 2025, rental property investors will benefit from generally lower income tax rates and other favorable changes to the tax brackets. The TCJA retains seven tax rate brackets, although six of the brackets’ rates are lower than before.


2022 Income Tax Rates

Here are the updated regular income rates for tax year 2022 (due in April 2023 or October 2023 with an extension):

Tax RateSingleMarried Filing JointlyHead of Household
10%$0 – $10,275$0 – $20,550$0 – $14,650
12%$10,276 – $41,775
$20,551 – $83,550
$14,650 – $55,900
22%$41,776 – $89,075
$83,551 – $178,150
$55,901 – $89,050
24%$89,076 – $170,050
$178,151 – $340,100
$89,051 – $170,050
32%$170,051 – $215,950
$340,101 – $431,900
$170,051 – $215,950
35%$215,951 – $539,900
$431,901 – $647,850
$215,951 – $539,900
37%$539,901 and up
$647,851 and up$539,901 and up

Keep in mind that you pay separate tax rates for each “segment” of income. For example, a single taxpayer with an adjusted gross income of $50,000 would pay the following taxes:

$1,027.50 on their first $10,275 of income (10%)

$3,779.88 on the next $31,499 of income (12%)

$1,809.28 on the next $8,224 of income (22%)

Total Taxes: $6,616.66             Effective Tax Rate: 13.23%


2023 Income Tax Rates

For tax year 2023 (taxes due in April 2024), the regular income tax brackets shifted upward as follows:

Tax RateSingleMarried Filing JointlyHead of Household
10%$0 – $11,000$0 – $22,000$0 – $15,700
12%$11,001 – $44,725
$22,001 – $89,450
$15,701 – $59,850
22%$44,726 – $95,375
$89,451 – $190,750
$59,851 – $95,350
24%$95,376 – $182,100
$190,751 – $364,200
$95,351 – $182,100
32%$182,101 – $231,250
$364,201 – $462,500
$182,101 – $231,250
35%$231,251 – $578,125
$462,501 – $693,750
$231,251 – $578,100
37%$578,126 and up
$693,751 and up$578,101 and up


Long-Term Capital Gains Tax Brackets

Remember, short-term capital gains — earnings on investments held for less than one year, such as flipped homes — are taxed as regular income. But the IRS charges less for long-term capital gains: earnings from investments held for at least one year.

Roughly speaking, taxpayers pay 0% on long-term capital gains if their income falls in the 10% or 12% income tax brackets. If they earn enough to pay regular income taxes at the 22% tax rate, they have to start paying taxes on long-term capital gains.

Read up on ways to defer or avoid capital gains taxes on real estate to lower your tax bill even further.


2022 Capital Gains Tax Rates

Here’s how the tax brackets look for long-term capital gains for tax year 2022 (due in April 2023):

Capital Gains Tax RateSingleMarried Filing JointlyHead of Household
0%$0 – $41,675$0 – $83,350$0 – $55,800
15%$41,676– $459,750$83,351 – $517,200$55,801 – $488,500
20%$459,751 and up$517,201 and up$488,501 and up
Additional Net Investment Income Tax
3.8%MAGI above $200,000MAGI above $250,000MAGI above $200,000


2023 Capital Gains Tax Rates

For tax year 2023 (taxes due in April 2024), the capital gains tax brackets bump up:

Capital Gains Tax RateSingleMarried Filing JointlyHead of Household
0%$0 – $44,625$0 – $89,250$0 – $59,750
15%$44,626 – $492,300$89,251 – $553,850$59,751 – $523,050
20%$492,301 and up$553,851 and up$523,051 and up
Additional Net Investment Income Tax (NIIT)
3.8%MAGI above $200,000MAGI above $250,000MAGI above $200,000

The 2023 tax brackets jumped more than usual, given the high inflation rate during 2022.


TCJA Changes to the Home Mortgage Deduction

The changes in the Tax Cuts and Jobs Act of 2017 (TCJA) impacted homeowners, real estate investors and landlords alike. Here’s an outline of what you need to know as a real estate owner, and when in doubt, hire a professional who knows accounting with a real estate investing focus. Ideally one who invests in real estate themselves.

Home mortgage interest remains deductible up to $1,000,000, for loans that settled before December 15, 2017.

Home mortgage debt incurred after December 15, 2017 is only deductible up to $750,000. Mortgage interest on rental property loans is unaffected by the TCJA.

Another change worth mentioning is the tax deduction is no longer available on HELOCs (home equity lines of credit) since tax year 2019.

Keep in mind that interest on HELOCs for rental properties remains deductible for landlords.


No Self-Employment Taxes for Landlords

In many ways, landlords get the best of both worlds: the tax benefits of owning a business, without the downside of self-employment taxes.

Real estate flippers can sometimes fall under the “dealer” category, and find themselves subject to double FICA taxes. FICA taxes fund Social Security and Medicare, and cost both employees and employers 7.65% of all income paid. Self-employed people end up having to pay both sides of FICA taxes, at 15.3% of total income. If you haven’t done so already, consider using a tax calculator to make sure everything is accurate.

But the Tax Cuts and Jobs Act of 2017 ended up leaving landlords and their rental income free from any FICA taxes.


Passive Income Loss Rule

If you have losses from “passive activities” such as owning rental properties, typically you can only deduct those losses to offset other passive income sources, such as other rental properties. For example, if you earn $10,000 from one rental property and have an $8,000 loss on another, you can offset your $10,000 income with the $8,000 loss, for a net taxable rental income of $2,000.

But if you have a net loss, that can’t be used as a deduction against your active income from your 9-5 job. You can carry it forward however, to offset future passive income earnings and rents.

Here’s how the TCJA changes matters: there’s a new $250,000 cap for single filers, $500,000 cap for married filers, for passive losses. Any passive losses that you’re allowed, in excess of those caps, must be carried forward to the next tax year.

It won’t affect most landlords, but it’s something to be aware of.


Final Word

It’s hard to get ahead if 50% of your income is going to taxes (which it probably is, if you add up everything you pay in sales tax, property tax, federal income tax, state income tax, local income tax and FICA taxes). But by being savvier with your documentation and deductions, landlords and real estate investors can pay less in taxes than other people, and truly realize the advantages of entrepreneurship.

Remember to always document every expense you plan to deduct. That means keeping receipts, invoices and bills throughout the year as expenses pop up; to help with this, keep a separate checking account for your real estate expenses if you don’t already. Never swipe that debit card or write a check from that account without first getting documentation!

We will continue updating and expanding this article content as the upcoming tax changes continue. (If you want to be notified of future webinars by email, sign up for our mailing list – you even get access to our free mini-course on buying 2-4 multifamily rentals!)

Feel free to pass this rental property deductions checklist on to other landlords, to make sure they’re taking advantage of all rental property tax deductions available for landlords!


How aggressive do you get with your travel deductions and home office deduction? Do you leave your mortgages in place just for the interest deduction? Spill the beans!

More Continual Learning for Landlords

About the Author

G. Brian Davis is a real estate investor and cofounder of SparkRental who spends 10 months of the year in South America. His mission: to help 5,000 people reach financial independence with passive income from real estate. If you want to be one of them, join Brian and Deni for a free class on How to Earn 15-30% on Fractional Real Estate Investments.

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