Rental Property Tax Deductions: The Complete List

The list, with the Schedule E line for each

Schedule E, Part I, has a line for each common expense type. This is where each deduction usually lands:

Expense	Schedule E line	Notes
Advertising	5	Listing fees, signs, paid listing upgrades
Auto and travel	6	Trips to the property, the hardware store, the bank
Cleaning and maintenance	7	Turnover cleaning, lawn care, pest control, snow removal
Commissions	8	Rental agent commissions; costs to secure a long lease may be spread over its term
Insurance	9	Landlord policy, flood, liability umbrella share for the rental
Legal and other professional fees	10	Tax prep for the rental, attorney fees, eviction costs
Management fees	11	Property manager’s monthly percentage
Mortgage interest paid to banks	12	From Form 1098
Other interest	13	Private loans, credit card interest on rental purchases
Repairs	14	Fixing what’s broken, back to how it was
Supplies	15	Light bulbs, filters, smoke detector batteries
Taxes	16	Property tax on the rental
Utilities	17	Only the ones you pay, not the tenant
Depreciation	18	Building and improvements, from Form 4562 in the first year
Other	19	HOA dues, software, bank fees, screening you pay for

Put each expense on one line only, and be consistent from year to year.

Mortgage interest and points

Interest on the loan you used to buy or improve the rental is deductible. Principal isn’t. Points you paid on a rental loan aren’t deducted all at once like on your home; they’re generally spread over the life of the loan. Refinance points work the same way. If you refinance and take cash out for personal use, the interest on that portion isn’t a rental expense.

Depreciation

You can’t deduct what you paid for the building in the year you buy it. You depreciate it over 27.5 years, straight line, starting the month it’s placed in service, with the mid-month convention in the first year. Land is never depreciable.

On a $255,000 depreciable basis, that’s about $9,273 a year. Improvements get their own 27.5-year schedule. Appliances, carpet and furniture are generally 5-year property, and fences and driveways generally 15-year.

Depreciation reduces your basis, and the IRS taxes it at sale whether or not you claimed it. Claim it every year.

Repairs or improvements

This is where most landlords get it wrong. A repair keeps the property in working order: patching drywall, fixing a leaking faucet, replacing a broken window pane. You deduct it in the year you pay.

An improvement makes the property better, restores it after major wear, or adapts it to a new use: a new roof, a kitchen remodel, a new HVAC system, an added bathroom. You depreciate it.

Three safe harbors can let you deduct more right away:

• De minimis safe harbor. Deduct items costing up to $2,500 per invoice or item (or $5,000 if you have an applicable financial statement, which most landlords don’t). You elect it each year with a statement on your return. A $1,900 refrigerator can be deducted instead of depreciated.
• Routine maintenance safe harbor. Recurring work you expect to do more than once in 10 years to keep the building running, like servicing the furnace, can be deducted.
• Small taxpayer safe harbor. For buildings with an unadjusted basis of $1 million or less, if your total repairs, maintenance and improvements on that building for the year are no more than the lesser of $10,000 or 2% of its unadjusted basis, you can deduct them all. There’s an income test too.

These rules have conditions. Ask your tax preparer before you rely on one.

Travel and mileage

Driving to show the unit, meet a contractor, collect rent or buy supplies is deductible. Use either the IRS standard mileage rate, which changes each year, or your actual car costs for the rental share. Keep a log with dates, miles and the reason for each trip. Long-distance trips to an out-of-state rental can be deductible if the main purpose is the rental, not a vacation.

Software, screening and banking costs

The tools you pay for are deductible:

• Software. TurboTenant Pro at $199 a year, RentRedi at $144 a year, Stessa Manage at $12 a month billed annually, or Buildium Essential at $62 a month.
• Payment fees you absorb. If you cover the tenant’s $2 ACH fee on Innago, that’s your expense. Fees tenants pay themselves aren’t yours to deduct.
• Screening you pay for. Some landlords pay for reports, like SmartMove’s $40 SmartCheck Plus. If the applicant pays, it isn’t your expense.
• Bank fees. Including setup fees like Buildium’s $99 per business bank account on Essential.

Other deductions worth knowing

• HOA or condo dues for a rental unit.
• Home office. Possible if you use a space regularly and exclusively for your rental business, but the rules are strict for rentals. Ask your tax preparer.
• Qualified business income deduction. If your rental counts as a trade or business, you may be able to deduct up to 20% of the net rental income. There’s an IRS safe harbor based on 250 or more hours of rental services a year. Ask your tax preparer whether you qualify.
• Insurance premiums paid in advance. Generally deductible for the year they cover, not all in the year you pay.

What you can’t deduct

• Mortgage principal.
• The land, ever.
• Your own labor.
• Improvements in full in one year, unless a safe harbor applies.
• The personal-use share of a property you also live in or vacation at.
• Security deposits you plan to return. They aren’t income either, until you keep some.
• Unpaid rent, if you’re on the cash method.
• Fines and penalties paid to a government.

Passive loss limits

Rental real estate is generally a passive activity, so a rental loss (often created by depreciation) can only offset passive income. The exception: if you actively participate, up to $25,000 of losses can offset your salary or other income. That allowance phases out between $100,000 and $150,000 of modified adjusted gross income. Special rules apply if you’re married filing separately.

Losses you can’t use carry forward to later years, and they’re generally released when you sell the property in a taxable sale. Real estate professionals have different rules. You’ll use Form 8582 to work this out. Ask your tax preparer.

Closing costs when you buy

Most closing costs at purchase aren’t deducted. Title insurance, recording fees, transfer taxes and legal fees go into the property’s basis and get depreciated. Prorated property taxes and mortgage interest you pay at closing are deductible in that year. Loan costs, like points and origination fees, are generally spread over the life of the loan. Keep the closing statement for as long as you own the property.