Rental property tax deductions
Landlords deduct the ordinary and necessary costs of renting on Schedule E: mortgage interest, property tax, insurance, repairs, management fees, utilities you pay, travel to the property, and depreciation of the building over 27.5 years. Improvements are not deducted at once but depreciated. Keep receipts and a ledger for every expense.
The checklist
| Expense | Schedule E line | Note |
|---|---|---|
| Advertising | 5 | Listing sites, signs |
| Auto and travel | 6 | Trips to the property; standard mileage or actual costs |
| Cleaning and maintenance | 7 | Turnover cleaning, lawn care |
| Insurance | 9 | Landlord policy, liability |
| Legal and professional fees | 10 | Accountant, attorney, tenant screening services |
| Management fees | 11 | Property manager |
| Mortgage interest | 12 | Interest only, not principal |
| Repairs | 14 | Fixing what’s broken, not improving |
| Supplies | 15 | Small items for the rental |
| Taxes | 16 | Property tax |
| Utilities | 17 | Only those you pay |
| Depreciation | 18 | Building and improvements, see depreciation |
Repairs vs improvements
A repair keeps the property in working order (fixing a leak, replacing a broken window) and is deducted in the year paid. An improvement makes it better, restores it or adapts it to a new use (new roof, kitchen remodel) and is depreciated. Two safe harbors help small landlords:
- De minimis safe harbor: items up to $2,500 per invoice or item can be deducted as an expense.
- Small taxpayer safe harbor: for buildings with an unadjusted basis of $1 million or less, annual repairs and improvements up to the lesser of $10,000 or 2% of the basis can be deducted.
Losses and the $25,000 allowance
Rental losses are passive. If you actively participate (approving tenants, setting rent), you can deduct up to $25,000 of rental losses against other income; the allowance phases out between $100,000 and $150,000 of modified AGI. Unused losses carry forward.
Not deductible
- Mortgage principal
- The cost of land (land isn’t depreciated)
- Your own labor
- Security deposits you will return
Schedule E ready at year end. RentLedger HQ Pro groups your income and expenses by Schedule E line for each property, so your accountant gets totals instead of a shoebox. $7 a month.
Open the tenant ledgerQuestions
Can I deduct expenses while the unit is vacant?
Yes, if it’s held for rent and actively advertised. Costs before the first rental can be different; ask your tax advisor.
Is the 20% QBI deduction available?
Sometimes. A rental can qualify if it rises to a trade or business; the IRS safe harbor requires 250 hours of rental services a year among other conditions.
Do I need receipts for everything?
Yes. Keep receipts, invoices and bank records for at least 3 years after filing, longer for property basis records.
Checked against IRS Publication 527, Schedule E instructions, Treas. Reg. § 1.263(a)-1(f) and -3(h), and IRC § 469(i), November 2026. Not tax advice.